After the exit: acquisitions, entrepreneurial recycling and regional economic development

Most studies of the impact of mergers and acquisitions suggest they have a detrimental impact on economic development in peripheral regions over the longer-term. However, such assessments fail to consider the post-acquisition behaviour of the cashed-out entrepreneurs. It is argued here that acquisition triggers a process of 'entrepreneurial recycling' in which the entrepreneurs use their newly acquired wealth, allied to the experience they have accumulated, to engage in other entrepreneurial activities, notably starting new business ventures and investing in other businesses as business angels or venture capitalists. Case studies of five Scottish technology-based firms that were acquired by non-UK companies illustrate this process. When entrepreneurial recycling is taken into account, the overall impact of acquisition on regional economic development may be considerably more positive than the literature has suggested. Moreover, at a time when 'rustbelt' regions, such as Scotland, are becoming less competitive as locations for foreign direct investment, the acquisition of locally owned knowledge-based companies remains a way in which they can continue to attract such investment. The paper concludes with a research agenda for future studies of the 'harvest event'