Stock-financed M&As of newly listed firms

Stock-financed M&As of newly listed firms Newly listed firms are increasingly active in mergers and acquisitions (M&As). The “stock as currency” motivation explains why firms engage in stock-financed acquisitions after their Initial Public Offering (IPO). We extend its implications by focusing on the role played by stock liquidity, which entails potential benefits not only for prospective acquirers, but also for targets. We find that 16.3 % of the population of 3433 firms going public in Europe from 1995 to 2009 become acquirers within 3 years of the IPO, while 16.8 % are targeted. Firms with more liquid stocks are more likely to acquire and complete a larger number of stock-financed acquisitions. More liquid firms are also more likely to be acquired, and at higher valuations. Our firm-level findings, supported by time-series regressions, imply that firms should time their IPO based on liquidity considerations to facilitate subsequent M&A activity as either acquirer or target. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Stock-financed M&As of newly listed firms

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-016-9767-0
Publisher site
See Article on Publisher Site

Abstract

Newly listed firms are increasingly active in mergers and acquisitions (M&As). The “stock as currency” motivation explains why firms engage in stock-financed acquisitions after their Initial Public Offering (IPO). We extend its implications by focusing on the role played by stock liquidity, which entails potential benefits not only for prospective acquirers, but also for targets. We find that 16.3 % of the population of 3433 firms going public in Europe from 1995 to 2009 become acquirers within 3 years of the IPO, while 16.8 % are targeted. Firms with more liquid stocks are more likely to acquire and complete a larger number of stock-financed acquisitions. More liquid firms are also more likely to be acquired, and at higher valuations. Our firm-level findings, supported by time-series regressions, imply that firms should time their IPO based on liquidity considerations to facilitate subsequent M&A activity as either acquirer or target.

Journal

Small Business EconomicsSpringer Journals

Published: Jun 27, 2016

References

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