The impact of a conglomerate merger on its vendors and rivals – a case study of Google's acquisition of Motorola

Abstract

ABSTRACTThis study explores the valuation effects of the conglomerate merger on an acquiring firm and its stakeholders. We examine Google's acquisition of Motorola and the impact that it had on Google's vendors and rivals. The empirical results suggest that the announcement of this deal led to positive market reaction among Android's vendors, primarily due to Google's ability to use Motorola's extensive patent portfolio to help protect Android's vendors from a potential patent infringement war in the future. Our results also find that when the Open Handset Alliance members obtain help from Motorola's patents or get new technology, an increase in shareholder wealth among Android's vendors and a decrease in shareholder wealth among Android's rivals are likely to occur.