The Stock Market Evaluation of IPO-Firm Takeovers

UO Working Paper No. 01-11

32 Pages Posted: 6 Apr 2011

See all articles by Thorsten V. Braun

Thorsten V. Braun

University of Augsburg - Faculty of Business and Economics

Erik E. Lehmann

University of Augsburg - Faculty of Business and Economics

Manuel T. Schwerdtfeger

University of Siegen - Faculty of Business Administration

Date Written: April 4, 2011

Abstract

We conduct an event study to assess the stock market evaluation of public takeover announcements. Unlike the majority of previous research, we specifically focus on acquisitions targeted at newly public IPO-firms and show that the stock market positively evaluates these M&As as R&D. However, bidders’ abnormal announcement returns are significantly lower for takeovers directed at targets with critical intangible assets and innovative capabilities inalienably bound to their initial owners than for those that have internally accumulated respective resources and capabilities. We explain these findings with the acquirer’s post-acquisition dependence on continued access to the IPO-firm founders’ target-specific human capital. Our results contribute to literature in that they show that the stock market perceives these potential impediments to successful exploitation of acquired strategic resources and thus identify a potential cause for heretofore mostly inconsistent evidence on bidder abnormal returns in corporate takeovers found in previous research.

Keywords: Ownership Structure, High-Tech IPO-Firms, Mergers & Acquisitions

JEL Classification: D23, G32, G34, L22, M13

Suggested Citation

Braun, Thorsten V. and Lehmann, Erik E. and Schwerdtfeger, Manuel T., The Stock Market Evaluation of IPO-Firm Takeovers (April 4, 2011). UO Working Paper No. 01-11. Available at SSRN: https://ssrn.com/abstract=1803358 or http://dx.doi.org/10.2139/ssrn.1803358

Thorsten V. Braun (Contact Author)

University of Augsburg - Faculty of Business and Economics ( email )

Augsburg, 86135
Germany

Erik E. Lehmann

University of Augsburg - Faculty of Business and Economics ( email )

Universitätsstr. 16
Augsburg, 86135
Germany

Manuel T. Schwerdtfeger

University of Siegen - Faculty of Business Administration ( email )

Hoelderlinstr. 3
Siegen, 57072
Germany

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