| Acquisitions in high technology industries increased significantly in numbers and value to record levels during 1990--2000. This occurred despite studies done in the 1980's and 1990's that found little positive effect financially for the acquiring company. This apparent anomaly is explored in this research by looking at the single high velocity, technology industry of semiconductors rather than a cross-section of unrelated businesses. Counter to literature, this empirical study does find a positive correlation between the presence of acquisitions and profitability growth. Relationships were examined separately in the first phase of discovery for company size, acquisition events, profit margin growth and year. As significance and correlation emerged, the study used a two factor, two level, repeated measures model over nine years (2 x 2 x 9) and a multivariate analysis to capture the interactions and further characterize the relationships. A positive and significant 2-way and 3-way interaction was found for the variables between acquisitions, profitability growth rate, and company size. The results find that larger acquiring companies experience steady growth in profit margins. Small companies with no acquisition activity saw a steady decline. Small non-acquirers have an approximate three year period to realize improvement from one acquisition event, then the benefit declines. Large non-acquiring companies showed a sharp decline in profit growth as the acquisition activity increased in the rest of the industry. Accelerating the innovation cycle is critically important to remaining competitive for high technology companies and strategic decisions concerning acquisitions play an important role. |
