Fact of the Week: Private-target M&As Have Heightened Expected Innovation Outcomes Versus Public Targets

Source: Siti Farida, et al., “M&As and Innovation: Evidence from Acquiring Private Firms,” (Journal of Corporate Finance, Vol. 96, 102905, January 2026).

Commentary: In a new paper in the Journal of Corporate Finance, Siti Farida et al. finds that mergers and acquisitions (M&As) in which a public company acquires a private company have more positive innovation outcomes than do public-public acquisitions. They hypothesize that this occurs because of the different roles public and private firms tend to play in value creation and capture: Public firms tend to be larger with better commercialization assets while private firms tend to be smaller and geared around inventions. The authors document patent counts, forward citations, and other innovation quantity and quality proxy variables for a matched sample of 1,153 private/public pairs of acquisitions by similar public acquirers. They find that the transactions with private targets have innovation outcomes that increase more – or decrease less – than those with public targets and have expected average increases in patent counts, forward citations, and patent value of 15.3 percent, 8.3 percent, and 12.9 percent respectively following acquisitions of private versus public targets. The findings suggest that, while both types of acquisitions can have beneficial innovation outcomes, complementarities between public acquirers and private targets may make them especially disposed to do so. This should inform antitrust analysis of M&As and may cut against the “killer acquisition” or anticompetitive “roll-up” strategy narratives put forward by skeptics of acquisitions by large public companies.