Paper ID

1392

Paper Type

full

Description

Digital technology giants extend platform boundaries by mergers and acquisitions. We analyze 435 transactions between 2008 and 2017 and observe two opposing value effects. On the one hand, transactions that are related to the core business create owner and user value due to positive influences of the market environment in terms of network effects, complementarities and decreasing competition. On the other hand, value dilution is driven by a distinct financial strength and by unrelated transactions. High liquidity can trigger corporate governance issues and unrelated deals have limited value potential, but high opportunity costs. We provide the first detailed analysis on M&A value creation of leading digital platforms, which indicates that user and owner value are interlinked. We emphasize that owners need to ensure capital markets control and critically monitor the M&A activity of digital giants.

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Do Digital Giants Create Value by Mergers and Acquisitions?

Digital technology giants extend platform boundaries by mergers and acquisitions. We analyze 435 transactions between 2008 and 2017 and observe two opposing value effects. On the one hand, transactions that are related to the core business create owner and user value due to positive influences of the market environment in terms of network effects, complementarities and decreasing competition. On the other hand, value dilution is driven by a distinct financial strength and by unrelated transactions. High liquidity can trigger corporate governance issues and unrelated deals have limited value potential, but high opportunity costs. We provide the first detailed analysis on M&A value creation of leading digital platforms, which indicates that user and owner value are interlinked. We emphasize that owners need to ensure capital markets control and critically monitor the M&A activity of digital giants.