Private and Public Merger Waves
University of Maryland - Robert H. Smith School of Business
Gordon M. Phillips
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)
University of Maryland, R. H. Smith School of Business
May 27, 2010
We examine the participation of public and private firms in merger waves and their outcomes. We show that public firms participate more in mergers and acquisitions than private firms and are more cyclical in their acquisitions. Public firms are also impacted more by macro factors including credit spreads and aggregate merger activities. Plants acquired on-the-wave realize more gain in productivity. We show that our results are not just driven by the fact that public firms have better access to capital. Using productivity data early in the firm's life, we find that better firms select to become public and that we can predict higher participation in productivity-increasing mergers and acquisitions ten and more years later after a firm's initial appearance. Our results suggest that a firm's potential can be identified early and that high potential firms become public in anticipation of accessing capital in the public markets when opportunities arise.
Number of Pages in PDF File: 47
Keywords: Merger Waves, Private Firms, Initial Conditions, TFP
Date posted: June 18, 2010
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