IDEAS home Printed from https://ideas.repec.org/a/bla/jacrfn/v22y2010i2p94-99.html
   My bibliography  Save this article

How an IPO Helps in M&A

Author

Listed:
  • Ugur Celikyurt
  • Merih Sevilir
  • Anil Shivdasani

Abstract

An initial public offering (IPO) can often provide a powerful stimulus to private companies seeking to pursue an acquisition‐driven growth strategy. Based on a comprehensive analysis of U.S. IPOs, the authors show that newly public companies are prolific acquirers. Over 30% of companies conducting an IPO make at least one acquisition in their IPO year, and the typical IPO firm makes about four acquisitions during its first five years as a public company. IPOs facilitate M&A not only by providing infusions of capital but also by creating ongoing access to equity and debt markets for cash‐financed deals. In addition, IPOs create an acquisition currency that can prove valuable in stock‐financed deals when the shares are attractively priced. The authors also argue that IPOs improve the ability of companies to conduct M&A by resolving some of the valuation uncertainty facing privately held companies.

Suggested Citation

  • Ugur Celikyurt & Merih Sevilir & Anil Shivdasani, 2010. "How an IPO Helps in M&A," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(2), pages 94-99, April.
    • Handle: RePEc:bla:jacrfn:v:22:y:2010:i:2:p:94-99
    DOI: 10.1111/j.1745-6622.2010.00278.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1745-6622.2010.00278.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1745-6622.2010.00278.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Luigi Zingales, 1995. "Insider Ownership and the Decision to Go Public," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(3), pages 425-448.
    2. Celikyurt, Ugur & Sevilir, Merih & Shivdasani, Anil, 2010. "Going public to acquire? The acquisition motive in IPOs," Journal of Financial Economics, Elsevier, vol. 96(3), pages 345-363, June.
    3. James C. Brau & Stanley E. Fawcett, 2006. "Initial Public Offerings: An Analysis of Theory and Practice," Journal of Finance, American Finance Association, vol. 61(1), pages 399-436, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Reddy, K. Srinivasa, 2011. "The aftermarket pricing performance of initial public offers: Insights from India," MPRA Paper 62885, University Library of Munich, Germany, revised 2013.
    2. Mortal, Sandra & Nanda, Vikram & Reisel, Natalia, 2020. "Why do private firms hold less cash than public firms? International evidence on cash holdings and borrowing costs," Journal of Banking & Finance, Elsevier, vol. 113(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Ewens & Joan Farre-Mensa, 2020. "The Deregulation of the Private Equity Markets and the Decline in IPOs," The Review of Financial Studies, Society for Financial Studies, vol. 33(12), pages 5463-5509.
    2. Jeon, Jin Q. & Lee, Cheolwoo & Nasser, Tareque & Via, M. Tony, 2015. "Multiple lead underwriter IPOs and firm visibility," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 128-149.
    3. Anderson, Christopher W. & Huang, Jian & Torna, Gökhan, 2017. "Can investors anticipate post-IPO mergers and acquisitions?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 496-521.
    4. Andrea Signori & Silvio Vismara, 2017. "Stock-financed M&As of newly listed firms," Small Business Economics, Springer, vol. 48(1), pages 115-134, January.
    5. Silvio Vismara & Stefano Paleari & Jay R. Ritter, 2012. "Europe's Second Markets for Small Companies," European Financial Management, European Financial Management Association, vol. 18(3), pages 352-388, June.
    6. Signori, Andrea, 2018. "Zero-revenue IPOs," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 106-121.
    7. Boucher, Carène & Kooli, Maher, 2022. "Anatomy of money-losing IPOs," Research in International Business and Finance, Elsevier, vol. 60(C).
    8. Balogh, Attila & Creedy, Usha & Wright, Danika, 2022. "Time to acquire: Regulatory burden and M&A activity," International Review of Financial Analysis, Elsevier, vol. 82(C).
    9. Martijn J. Assem & Nico L. Sar & Philippe Versijp, 2017. "CEOs and CFOs on IPOs: The Process and Success of Going Public," De Economist, Springer, vol. 165(4), pages 381-410, December.
    10. Lee, Chien-Chiang & Ning, Shaolin & Hsieh, Meng-Fen & Lee, Chi-Chuan, 2020. "The going-public decision and rent-seeking activities: Evidence from Chinese private companies," Economic Systems, Elsevier, vol. 44(1).
    11. Ning Jia, 2017. "Diversification of pre-IPO ownership and foreign IPO performance," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1031-1061, May.
    12. Michael Ewens & Joan Farre-Mensa, 2022. "Private or Public Equity? The Evolving Entrepreneurial Finance Landscape," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 271-293, November.
    13. Mayur, Manas & Kumar, Manoj, 2006. "An Empirical Investigation of Going Public Decision of Indian Companies," MPRA Paper 1801, University Library of Munich, Germany.
    14. Mittoo, Usha & Ng, Dennis & Yan, Meng, 2020. "Managerial ownership, credit market conditions, undervaluation and offer premiums in management (MBOs) and leveraged buyouts (LBOs)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    15. Rajni Mala & Michael White, 2009. "The South Pacific Stock Exchange: Is it a Market or Status Symbol?," Australian Accounting Review, CPA Australia, vol. 19(1), pages 54-63, March.
    16. Xie, Xiaoying, 2010. "Are publicly held firms less efficient? Evidence from the US property-liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1549-1563, July.
    17. C. Hopp & A. Dreher, 2013. "Do differences in institutional and legal environments explain cross-country variations in IPO underpricing?," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 435-454, February.
    18. Alavi, Arash & Pham, Peter Kien & Pham, Toan My, 2008. "Pre-IPO ownership structure and its impact on the IPO process," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2361-2375, November.
    19. Blomkvist, Magnus & Korkeamäki, Timo & Takalo, Tuomas, 2022. "Learning and staged equity financing," Journal of Corporate Finance, Elsevier, vol. 74(C).
    20. Autore, Don M. & Boulton, Thomas J. & Smart, Scott B. & Zutter, Chad J., 2014. "The impact of institutional quality on initial public offerings," Journal of Economics and Business, Elsevier, vol. 73(C), pages 65-96.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jacrfn:v:22:y:2010:i:2:p:94-99. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1078-1196 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.