Young CEOs in tech disrupt traditional acquisition paradigms
There are times when mergers or acquisitions are used as a tool of retirement. When a longtime CEO is finished professionally and has no one to turn his or her business over to, sometimes a merger or acquisition can set his or her brainchild up for success while presenting a nest egg for retirement. A study called "CEO Preferences and Acquisitions" by Dirk Jenter and Katharina Lewellen of the National Bureau of Economic Research described this phenomenon in the traditional way these deals are viewed.
"Bidders thus are more likely to target firms with retirement-age CEOs, possibly because of these CEOs' reduced resistance to takeovers," summarizes Matt Nesvisky of the study's findings. "The increase in takeover activity appears precisely at the age-65 threshold, with no gradual increase as CEOs approach retirement age, ruling out many alternative explanations."
However, this trend is defied by the tech industry. Because companies that deal in computers, mobile apps, cloud solutions and other newer technologies are generally young firms, so are their CEOs. According to the Harvard Business review, the most common age brackets for founding billion-dollar, venture capital-backed enterprises in tech are 20-24 and 30-34. A plurality of CEOs at these companies at present are between the ages of 40 and 44.
As such, the decision to sell tech enterprises usually has little to do with retirement and more to do with growth objectives and power plays. After selling his or her company, a tech founder may stay on with an altered title, move on to another project or accept work as a well-compensated consultant. Because tech acquisitions generally aren't targeting a vulnerable, aging CEO, decision makers hold a great deal of power with the cards they play.