Merger-Motivated IPOs |
| |
| Authors: | Armen Hovakimian Irena Hutton |
| |
| Affiliation: | 1. Armen Hovakimian is a Professor in the Zicklin School of Business at Baruch College in New York, NY 10010.;2. Irena Hutton is an Assistant Professor in the Department of Finance at Florida State University, Tallahassee, FL 32306. |
| |
| Abstract: | In this paper, we find support for initial public offerings (IPOs) motivated by subsequent acquisition activity. Over a third of newly public firms enter the market for corporate control as acquirers within three years of the IPO. We find that IPOs facilitate acquisitions in a number of ways. Newly public firms benefit from the cash raised in the IPO, from subsequent access to public financing, and from ability to pay with publicly traded stock for acquisitions. IPO firms also benefit by obtaining market feedback and by taking advantage of high post-IPO stock values in making stock-based acquisitions at favorable terms. |
| |
| Keywords: | |
|
|
