Abstract
To access digital capabilities, firms often acquire more digital counterparts. In this work, we investigate whether and when acquiring digital-technology-driven companies (i.e., digital merger and acquisitions (M&A)) lead to abnormal returns for acquirers. While empirical research indicates that M&A often do not create value for the acquiring firm, we draw on signaling theory and argue that, in the context of digital M&A, these effects may be less straightforward. Specifically, by applying an event study method drawing on a sample of digital M&A deals by S&P 500 firms between 2014 and 2018, our findings reveal that non-digital acquirers experience a positive effect on their market value around the announcement of the focal digital M&A, which is not reversed in the long run. However, for digital acquirers, we find neither a short-term nor a long-term effect of digital M&A on their market value. Our findings further show that, for non-digital acquirers, disclosed (vs. non-disclosed) deal prices increase the positive effect on market value. Taken together, our work provides a more nuanced look at digital M&As and highlights a novel benefit for non-digital acquirers, that is, increased market value. As such, the paper contributes to the literature on signals in market valuation and M&A research in the digital age.