It can happen that way, depending on the competence of the buyer.

A more likely way is that the large company decides that they have the capacity to assimilate the product into their pre-existing RD teams.

The end result is often that the large company gets a working product that gets any further progress totally stopped - not by intention, but by red tape.

The original RD team decides to jump ship - or gets kicked. Either the RD team gets split into neighbor companies, or they decide to start up a new company. Having produced one product that got them bought out means they have the knowledge (and probably the money) to do it again.

Suddenly, the customers gets a new alternative to choose from, where the new company quickly manages to reach and surpass the the previous product generation. A good RD team are competent individuals that works well together. Any company that ignores that deserves a bloody nose.