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Industry IPOs, growth opportunities, and private target acquisitions

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  • Aktas, Nihat
  • Cousin, Jean-Gabriel
  • Ozdakak, Ali
  • Zhang, Junyao

Abstract

As a result of increased information production and aggregation, acquiring companies may make merger decisions based on valuable information they extract from public markets. This paper examines acquisition decisions, and suggests a novel source of information for industry firms – the IPO market. The results provide evidence that industry IPOs signal the existence of available investment opportunities, in particular about privately-held firms. The proportion of private target acquisitions, stock payments, and acquirer announcement returns significantly correlates with signals derived from industry IPOs. Our results suggest that industry IPOs generate positive externalities by facilitating more efficient acquisition decisions.

Suggested Citation

  • Aktas, Nihat & Cousin, Jean-Gabriel & Ozdakak, Ali & Zhang, Junyao, 2016. "Industry IPOs, growth opportunities, and private target acquisitions," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 193-209.
    • Handle: RePEc:eee:corfin:v:37:y:2016:i:c:p:193-209
    DOI: 10.1016/j.jcorpfin.2015.12.016
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    More about this item

    Keywords

    Mergers and acquisitions; Industry IPOs; Underpricing; Private targets;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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