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 are geographically proximate and that have prior ties with the target are more likely to engage in dual tracking than others. Moreover, industry similarities and prior specific experience with the acquisition of newly-public firms are also predictors of dual tracking. These results withstand several robustness checks.

Keywords: Mergers and acquisitions, initial public offerings, information economics, entrepreneurial firms, dual tracking