Companies invest 4x more in M&A than R&D in the USA

I’ve been zooming out to gain a broader perspective of how finance and innovation interact in the economy for my work with the #FounderFriendlyStandard.

I asked the question: How much more money do companies invest in mergers & acquisitions (M&A) than in research and development (R&D)?

Here is the statistic that I found:

Graph showing corporate investments in R&D vs. M&A from 2008 to 2016
This graph shows that between years 2008 and 2016, companies invested 4x more money in mergers and acquisitions (M&A) than in research and development (R&D) in the United States.

The above stat comes from merging two data sources.

The first data source is Mergers & Acquisitions United States from the Institute for Mergers, Acquisitions, and Alliances (IMAA).

Graph showing dollar figures and total number of transactions for mergers and acquisitions in the United States from 1985 to 2017 from IMAA

The second data source is NSF 16-316 from the National Center for Science and Engineering Statistics, a division of the National Science Foundation (NSF).

NSF's research showing how much US businesses invested in research and development expenditures from 2008 to 2015

I put the two data sources into this spreadsheet comparing IMAA and NSF data. The overlapping values reveal that companies spend 4x more on acquiring companies than on research and development.

Spreadsheet showing my combined IMAA and NSF data.

My next questions are:

  • By and large, what are companies hoping to gain from these acquisitions?
  • Is innovation the primary driver?
  • Is there a more capital-efficient way to acquire innovation?

With that, I’m off to hunt for answers.

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