Why Newly Listed Firms Become Acquisition Targets

47 Pages Posted: 30 Dec 2010 Last revised: 31 Jul 2012

Soumen De

Menlo College

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Date Written: May 31, 2012

Abstract

We study the operating, financial, and ownership structure characteristics of newly listed firms which become acquisition targets shortly after their initial public offerings. We examine whether such firms get acquired because of their successful performance or as an alternative to delisting. We find that firms, which do relatively well in terms of operating as well as stock performance and attract institutional investor interest, draw the attention of acquirers. Furthermore, we observe that investments made by newly listed target firms do not destroy shareholder value and have comparable profitability to investments made by newly listed firms which grow by acquisitions. Overall, firms acquired shortly after listing are on a growth trajectory similar to that of surviving firms.

Keywords: Mergers and acquisitions, Initial public offerings, Operating performance, Financial leverage, Financial liquidity, Institutional ownership

JEL Classification: G31, G32, G34

Suggested Citation

De, Soumen and Jindra, Jan, Why Newly Listed Firms Become Acquisition Targets (May 31, 2012). Journal of Banking and Finance, Vol. 36 (2012), 2616-2631. Available at SSRN: https://ssrn.com/abstract=1732373 or http://dx.doi.org/10.2139/ssrn.1732373

Soumen De

Menlo College ( email )

1000 El Camino Real
Atherton, CA 94027
United States

Jan Jindra (Contact Author)

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

44 Montgomery Street
San Francisco, CA 94104
United States

Paper statistics

Downloads
398
Rank
59,066
Abstract Views
1,204