Moving From Private to Public Ownership: Selling Out to Public Firms vs. Initial Public Offerings

38 Pages Posted: 25 Mar 2005  

Annette B. Poulsen

University of Georgia - Department of Banking and Finance

Mike Stegemoller

Baylor University

Date Written: January 2006

Abstract

We study the movement of assets from private to public ownership through two alternative means: the acquisition of private companies by firms that are public (sellouts) or by initial public share offerings (IPOs). We consider firm-specific characteristics for 1,074 IPOs and 735 sellouts from 1995 through 2004 to identify differences in growth, capital constraints and asymmetric information between the two types of transactions. Our results suggest that firms move to public ownership through an IPO when they have greater growth opportunities, more capital constraints and are easier to value. Previous analyses of U.S. companies have focused on broad aggregate and industry-level trends while our work allows a better understanding of the firm-specific characteristics leading to firms choosing to go public through an IPO and the costs of accessing the public capital markets.

Keywords: initial public offerings, sellouts, going public, acquisitions

JEL Classification: G34, G32

Suggested Citation

Poulsen, Annette B. and Stegemoller, Mike, Moving From Private to Public Ownership: Selling Out to Public Firms vs. Initial Public Offerings (January 2006). AFA 2006 Boston Meetings. Available at SSRN: https://ssrn.com/abstract=684442 or http://dx.doi.org/10.2139/ssrn.684442

Annette B. Poulsen (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-3645 (Phone)

Michael A. Stegemoller

Baylor University ( email )

P.O. Box 98004
Waco, TX 76798-8004
United States
254-710-4145 (Phone)

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