This study examines the influence of patent thickets on mergers and acquisitions (M&A) and the allocation of capital. External patent thickets, formed by overlapping patents owned by multiple firms, decrease the likelihood of acquisition due to increased costs and risks. Internal patent thickets, consisting of a firm's own patents, increase the likelihood of acquisition for defensive purposes. The study highlights how patent thicket effects can hinder efficient capital allocation in the M&A market.