Who Gets First Dibs? A Buy-Side Investigation of the Dual Tracking Phenomenon in M&A

Abstract

We seek to identify the key characteristics that allow some firms to acquire valuable entrepreneurial resources in lieu of other potential buyers. This question is central to how firms are able to create and sustain a competitive advantage. The backdrop of this study is the phenomenon of dual tracking, which consists of the acquisition of entrepreneurial firms shortly after they undergo an initial public offering. The results reveal that acquirers that (1) are geographically proximate, (2) have prior ties with the target, and (3) are situated in the same industry as the target are more likely to engage in dual tracking than others. These results withstand several robustness checks.

Keywords: mergers and acquisitions; initial public offerings; information economics; entrepreneurial firms; dual tracking