Product market competition and the decision to acquire public versus private targets

We examine how product market competition shapes a firm’s choice between acquiring a public or a private target. We show that public target acquisitions are more likely than private target acquisitions in more competitive product markets. Relative to private targets, public targets are associated with larger post-acquisition gains in market share and scope, greater cost efficiency, and lower cash flow volatility. By contrast, private targets link with larger subsequent increases in R&D spending, patent count, and capital expenditures. Together, the evidence suggests that competitive pressure influences the attributes acquirers look for in target companies.