The Impact of Experience on Private Target Acquisition in High-Technology Industries

This paper investigates the impact of an acquirer's experience on the acquisition of private firms (i.e., private target acquisition) in high-technology industries by analyzing a dataset of NASDAQ-listed firms operating in information technology (IT) industries. Specifically, this paper examines whether two types of experience (i.e., early venture capital (VC)-backed experience and prior mergers and acquisitions (M&A) experience) matter to the acquisition. We find that both types of experience have positive effects on private target acquisition, while only prior M&A experience positively influences public target acquisition, implying that early VC-backed experience is effective in mitigating information asymmetry related to private target acquisition and exploring opportunities for value creation. We also find that an acquirer's growth performance and absorptive capacity prior to the acquisition enhance the positive effects of the experiences on private target acquisition.