The price of patents, liquidity, and information:Evidence from acquisitions of unlisted European high-tech targets

This thesis explores the acquisition discounts of unlisted targets reported in US takeovers with a European high-tech focused dataset, and a specific view on the determinants of that discount. More specifically, I study the interrelatedness of patents, target shareholders’ demand for liquidity, and the information asymmetry as explanatory measures of the acquisition discount. To provide a more thorough view of the role of patents, liquidity, and information asymmetry in acquisitions, I also study the determinants of the target having patented its innovations prior to the acquisition announcement, and those of the acquirer abnormal announcement return. In the former, I proceed with a specific focus on dimensions of information asymmetry as reasons for a target having patents. In the latter, my focus is similar to the study of the acquisition discounts. On the one hand, my results should provide validation for those found in the US, and on the other, a more thorough understanding of the listing effect, and the role of patents, liquidity, and information asymmetry in acquisitions of unlisted high-tech targets. Finally, I compliment my empirical findings and applicable parts of theory with results from a questionnaire sent to professionals in venture capital investments, and intellectual property management, both dealing specifically with M&A transactions. My results are consistent with my hypotheses that stem from literature and the survey results. More specifically, I find that decreased availability of liquidity decreases value to both acquirer and target owners. Moreover, both the survey responses and my empirical analyses suggest that patents are valuable to target owners, and their quality dimensions are important as well. Finally, I also find that the market’s perception of the economic rents to patents are attributable to their assignee, or in this case, the target who owns them prior to the acquisition.