How an IPO Helps in M&A

8 Pages Posted: 28 Jul 2010

See all articles by Ugur Celikyurt

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School

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

Celikyurt, Ugur and Sevilir, Merih and Shivdasani, Anil, How an IPO Helps in M&A. Journal of Applied Corporate Finance, Vol. 22, Issue 2, pp. 94-99, Spring 2010. Available at SSRN: https://ssrn.com/abstract=1649769 or http://dx.doi.org/10.1111/j.1745-6622.2010.00278.x

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics ( email )

Rumelifeneri Yolu
Sariyer 80910, Istanbul
Turkey

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

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