Acquisitions and Technology Value Revision

Acquisition announcements cause upward revisions in the market value of target firms' technology peers, whether targets and their peers belong to the same industry or not. Firms having deeper technology overlaps with the targets experience more dramatic price revisions. Consistent with the acquisition probability theory, a firm is more likely to be taken over if at least one of its technology peers has been acquired recently; and peers more vulnerable to acquisitions have greater upward price revisions. Our findings demonstrate that information diffusion along the technology links is essential for technology valuation