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Why newly listed firms become acquisition targets

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  • De, Soumendra
  • Jindra, Jan

Abstract

We study the operating, financial, and ownership structure characteristics of newly listed firms which become acquisition targets shortly after their initial public offerings. We examine whether such firms get acquired because of their successful performance or as an alternative to delisting. We find that firms, which do relatively well in terms of operating as well as stock performance and attract institutional investor interest, draw the attention of acquirers. Furthermore, we observe that investments made by newly listed target firms do not destroy shareholder value and have comparable profitability to investments made by newly listed firms which grow by acquisitions. Overall, firms acquired shortly after listing are on a growth trajectory similar to that of surviving firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 36 (2012)
Issue (Month): 9 ()
Pages: 2616-2631

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Handle: RePEc:eee:jbfina:v:36:y:2012:i:9:p:2616-2631

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Mergers and acquisitions; Initial public offerings; Operating performance; Financial leverage; Financial liquidity; Institutional ownership;

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References

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Cited by:
  1. Liu, Jia & Lister, Roger & Pang, Dong, 2013. "Corporate evolution following initial public offerings in China: A life-course approach," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 1-20.

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