Abstract
In this paper, we investigate the post-IPO operating performance of acquiring companies listed in the US in the period 1986–2008. We find that acquiring IPO firms delivers better operating returns when compared to non-acquiring IPO firms in the five years after the listing. This result holds controlling for both IPO and firm-specific characteristics. Furthermore, acquiring targets already listed on the stock exchange and running stock deals are associated with the improved operating performance. Finally, we find that acquisitions also affect the newly listed companies’ survival, reducing both the time to failure and the time to being acquired, which suggest a structural acceleration of the “natural” company lifecycle.
Highlights
Companies going public on stock exchanges can raise money tonance capital expenditures, intensify research and development (R&D), pursue growth strategies§ Corresponding author
We investigate through a multivariate analysis whether changes in operating performance are due to IPO and/orrm characteristics or are due to the acquisition strategies
Our results show that the probability of being acquired is larger when the IPO company is backed by a venture capitalist and when the IPOrm pursues a growth strategy focused on taking over other companies in therst year after the IPO
Summary
Companies going public on stock exchanges can raise money tonance capital expenditures (capex), intensify research and development (R&D), pursue growth strategies. After the listing, the operating performance of newly listed companies in most cases shows declining trends and a great deal of volatility when compared to the pre-IPO case This is both predicted by theoretical models, namely the agency theory (Jensen & Meckling 1976) and the information asymmetries theory (Leland & Pyle 1977), and widely documented by empirical research (Jain & Kini 1994, Mikkelson et al 1997). Contrary to empirical evidence based on stock returns, wend that post-IPO acquirers experience better operating performance compared to their non-acquiring peers. On the other hand, acquiring IPOrms experiences an insignicant change in operating performance after the IPO compared to industry medians Their change in performance is similar to already listedrms' one in theve years after the listing.
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