Bala Iyer

Presentaton
This paper presents an empirical study that: 1) tests the hypothesis that there is value in equity participation between companies that produce different components of a complementary network; and 2) empirically validates the software "stack". The "stack" is a structure in which the complementarity between products is highest when the two products are on adjacent layers. In a sample of Mergers and Acquisitions, in which either the acquirer or the target is a software firm, I find an inverse curvilinear relationship between abnormal returns and the distance between acquirers and targets in various layers of the stack. Abnormal returns are higher when both sides in the acquisition are classified in adjacent layers of the stack and smaller when acquirer and target are further apart on the stack or are on the same layer.