Merger-Motivated IPOs

51 Pages Posted: 15 Jun 2008 Last revised: 19 Sep 2009

See all articles by Armen Hovakimian

Armen Hovakimian

Baruch College - Zicklin School of Business

Irena Hutton

Florida State University - College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 28, 2009

Abstract

In this paper we explore and find support for 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 the role of an IPO in facilitating subsequent acquisitions is twofold. Newly-public firms benefit from the cash funding provided by the IPO, subsequent access to public financing and publicly traded stock, which facilitates stock-based acquisitions. IPO firms also benefit from obtaining public valuations. We find that these firms take advantage of high-post IPO stock values in making stock-based acquisitions at favorable terms and obtain market feedback.

Keywords: IPO, merger, market timing, market feedback

JEL Classification: G32, G34

Suggested Citation

Hovakimian, Armen and Hutton, Irena, Merger-Motivated IPOs (July 28, 2009). Available at SSRN: https://ssrn.com/abstract=1145535 or http://dx.doi.org/10.2139/ssrn.1145535

Armen Hovakimian (Contact Author)

Baruch College - Zicklin School of Business ( email )

One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3490 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://zicklin.baruch.cuny.edu/faculty-profile/armen-hovakimian/

Irena Hutton

Florida State University - College of Business ( email )

821 Academic Way
Tallahassee, FL 32306-1110
United States
850.645.1520 (Phone)

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