Going Public to Acquire? The Acquisition Motive in IPOs
Ugur Celikyurt, Merih Sevilir, Anil Shivdasani
Journal of Financial Economics,
No. 3,
2010
Abstract
Newly public firms make acquisitions at a torrid pace. Their large acquisition appetites reflect the concentration of initial public offerings (IPOs) in mergers and acquisitions-(M&A-) intensive industries, but acquisitions by IPO firms also outpace those by mature firms in the same industry. IPO firms' acquisition activity is fueled by the initial capital infusion at the IPO and through the creation of an acquisition currency used to raise capital for both cash- and stock-financed acquisitions along with debt issuance subsequent to the IPO. IPO firms play a bigger role in the M&A process by participating as acquirers than they do as takeover targets, and acquisitions are as important to their growth as research and development (R&D) and capital expenditures (CAPEX). The pattern of acquisitions following an IPO shapes the evolution of ownership structure of newly public firms.
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How an IPO Helps in M&A
Ugur Celikyurt, Merih Sevilir, Anil Shivdasani
Journal of Applied Corporate Finance,
No. 2,
2010
Abstract
An initial public offering (IPO) can often provide a powerful stimulus to private companies seeking to pursue an acquisition-driven growth strategy. Based on a comprehensive analysis of U.S. IPOs, the authors show that newly public companies are prolific acquirers. Over 30% of companies conducting an IPO make at least one acquisition in their IPO year, and the typical IPO firm makes about four acquisitions during its first five years as a public company. IPOs facilitate M&A not only by providing infusions of capital but also by creating ongoing access to equity and debt markets for cash-financed deals. In addition, IPOs create an acquisition currency that can prove valuable in stock-financed deals when the shares are attractively priced. The authors also argue that IPOs improve the ability of companies to conduct M&A by resolving some of the valuation uncertainty facing privately held companies.
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Markets for Bank Subordinated Debt and Equity in Basel Committee Member Countries
Reint E. Gropp, Jukka M. Vesala
BCBS Working Papers, No. 12,
No. 12,
2003
Abstract
This Basel Committee working paper is a study of the markets for banks' securities in ten countries (Belgium, France, Germany, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom, and the United States). It aims at contributing to the assessment of the potential effectiveness of direct and indirect market discipline. This is achieved through collecting a rich set of data on the detailed characteristics of the instruments used by banks to tap capital markets, the frequency and size of their issuance activity, and the share of issuing banks in national banking systems. Further, information is collected on the amounts of debt and equity outstanding and about trading volumes and liquidity. Developments over the period from 1990-2001 are evaluated.
The paper focuses on subordinated bonds among banks' debt instruments, because they are the prime class of uninsured instruments suited to generate market discipline and have been proposed by some observers as a mandatory requirement for banks.
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