Is M&A Information Useful for Exploring Promising Industries and Technologies?

Abstract

Companies today that seek to diversify their business are looking for opportunities in new markets by considering their core competencies. However, companies are struggling to diversify and grow their current businesses due to a lack of information concerning diversification and a low level of capability for future commercialization. In this study, we suggest a new methodology that identifies promising industry and technology areas by examining mergers and acquisitions (M&As) transaction data. Specifically, by analyzing the extent to which firms have engaged in M&A activities, the prediction of promising industries is derived from the relationships among specific industries, as well as the M&A transactions among technology areas within a focal industry. We first theoretically test whether all M&A transactions are related to promising areas. Second, we analyze the trends of global M&As by a time-series analysis of M&A transactions by sectors over the last 15 years. Lastly, we conduct an association analysis to identify the degree of M&A connections between industry and technology areas, respectively. We hope that our results provide insights for R&D policymakers and investors who need to decide on promising industries to cultivate or invest in, and researchers who want to identify overall M&A trends and promising industries and technology areas.

Development of a New Methodology to Identity Promising Technology Areas Using M&A Information

“…M&A is defined as being horizontal, vertical, and conglomerate [15,44,45]. M&A is considered horizontal when two companies compete directly and share the same product line and market, and it is considered vertical when a company expands backward by M&A with another company supplying raw materials or extends forward in the direction of the ultimate customer.…”

“…Therefore, it is necessary to propose a new methodology to explore promising technology areas as a new business opportunity for future growth. The alternative to the above judgmental methods and bibliometric analysis methods is quantitative approaches to analyze M&A transaction information [15].…”

“…M&A transaction depicts two corporates' efforts to create positive synergies through business combination [16,17]. M&A provides a mechanism to learn about the other firm's technologies, to recombine knowledge and technologies residing in different firms, and thereby to generate innovations [15,18]. M&A also represents a massive asset reallocation within and across industries, often enabling firms to double in size in a matter of months on a microeconomic level [19].…”