The M&A strategies of businesses operating on a platform model have received scant academic attention, despite the economic predominance of platform firms and the aggressiveness of their acquisition programs. In addition to undertaking more acquis...
The M&A strategies of businesses operating on a platform model have received scant academic attention, despite the economic predominance of platform firms and the aggressiveness of their acquisition programs. In addition to undertaking more acquisitions than non-platform firms of similar economic stature, leading platform firms often pursue unrelated targets, against the majority of studies in M&A literature that pinpoints business relatedness as the key mechanism for synergy creation. This study examines how platform firms differ from non-platform firms in selecting acquisition targets and what influences their propensity to acquire targets with a low level of relatedness. It begins by investigating two unique and fundamental traits of platform businesses that distinguish them from non-platform businesses: their governance of ecosystems, rather than mere products and services, and their possession of an installed base, which grants them the leverage to venture into new industries with comparative ease. Based on these two characteristics, this paper argues that platform firms are more inclined to take over firms with a larger relatedness gap than non-platform firms. Furthermore, as their installed bases increase, platform businesses more frequently utilize unrelated acquisitions to expand into industries distant from their core business domain. An analysis of 1,027 acquisitions completed between 2009 and 2019 by firms listed in the NASDAQ-100 supports these arguments. In addition to performing the first empirical analysis of the M&A activity of platform businesses in a multi-industry context, this study contributes to the development of an integrative view that connects the fragmented understanding of platforms by utilizing a comprehensive definition of platforms and a classification system that categorizes platforms into three different types based on their primary function (innovation platforms, transaction platforms, and integrated platforms).