The innovative characteristics of target firms: An analysis of Swedish data from 1998 to 2014

Sammanfattning: This paper investigates firm-specific innovative characteristics of acquired companies using descriptive statistics and regression analysis. This is done on a data sample on Swedish acquisitions among listed firms from the time period 1998 to 2014. The sample was narrowed down to include only transactions where the acquirer changed from holding a minor stake to a major stake and thus having controlling interest. Descriptive statistics is used to find differences in innovation output and property between the target firms and firms not participating in M&As. The probit regression is used to find the probability of becoming a target firm given certain innovative characteristics. A discussion of assumptions and sample bias is made. The analysed characteristics are R&D expenses over total sales and intangible assets (adjusted by extracting goodwill) over total assets. The quotas are used in order for us to compare firms with different size. Results are robustness checked and the model's fit is assessed. First, we show that R&D expenses lowers the probability of a firm becoming a target. Second, we show that the target firms within health care, technology and consumer discretionary have higher quotas of intangible assets compared to the non-target benchmark within the same industry. The targets' innovative property was however lower than the benchmark for the remaining industries. Industry- and time effects are controlled for in the regression but also discussed separately.