Patent-Right Uncertainty and Mergers and Acquisitions

We use patent thickets to study how patent-right uncertainty impacts target selection in mergers and acquisitions. This uncertainty can create additional costs that disrupt technological synergies. We find that firms are less likely to be acquired when their patents are in thickets exacerbating these costs. Conversely, firms are more likely to be acquired when their patents create thickets mitigating these costs. When a firm occupies the same thicket as the acquirer, acquisition probability depends on each firm's ability to impose costs on the other. Consistent with patent-right uncertainty disrupting synergies, we find that targets' thickets are associated with post-acquisition profitability.