Acquirer's Shareholder Value Creation in M&A Deals with Startups

Using the sample of 96 M&A’s from developed capital markets where the acquired company is a venture capital-backed startup, we investigate the impact of certain deal’s parameters and target’s characteristics on the shareholder value of the acquirer. Contemporary literature while acknowledging that a successful M&A is a function not only of the deal’s parameters and the acquirer’s characteristics, but also of the target company’s characteristics, has fallen short when analyzing the value creation potential of M&A deals with startups for the equity investors of the acquirer. Thus, the study aims to examine the efficiency of startup acquisition for the shareholders of the acquiring company. The event study methodology is used to assess the performance, while the main value drivers are determined using linear regression. The unrelatedness of the startup’s business to the acquirer’s industry is a value destructive factor, while the high-tech nature of the deal increases the shareholder wealth of the buyer. The study tries to fill in the gaps in the existing literature about startup acquisitions.