Going Public to Acquire: The Acquisition Motive for IPOs

33 Pages Posted: 16 Mar 2007  

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School

Date Written: 2006

Abstract

This paper demonstrates that the desire for making acquisitions is a primary consideration underlying the decision of companies to go public. Using a sample of IPOs from 1994-2004, we show that newly public firms make acquisitions at a torrid pace. This acquisition activity is fueled both through the initial proceeds from the IPO but also through the use of an acquisition currency that is used to raise capital for both cash and stock financed acquisitions. Acquisitions play a more significant role in the growth of newly public firms than internal investment through R&D and CAPEX.

Keywords: IPOs, Mergers and Acquisitons

JEL Classification: G32, G34

Suggested Citation

Celikyurt, Ugur and Sevilir, Merih and Shivdasani, Anil, Going Public to Acquire: The Acquisition Motive for IPOs (2006). AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=971900 or http://dx.doi.org/10.2139/ssrn.971900

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics ( email )

Rumelifeneri Yolu
Sariyer 80910, Istanbul
Turkey

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Anil Shivdasani (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

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