Merger-Motivated IPOs

Financial Management, Forthcoming

Posted: 23 Jul 2010 Last revised: 28 Jul 2010

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 23, 2010

Abstract

In this paper, we 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 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: IPO, Merger, Acquisition, Market Feedback

JEL Classification: G32, G34

Suggested Citation

Hovakimian, Armen and Hutton, Irena, Merger-Motivated IPOs (July 23, 2010). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1647714

Armen Hovakimian

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 (Contact Author)

Florida State University - College of Business ( email )

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

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