DOES POST-IPO M&A ACTIVITY AFFECT FIRMS’ PROFITABILITY AND SURVIVAL?

Abstract

In this paper, we investigate the post-IPO operating performance of acquiring companies listed in the US in the period 1986–2008. We find that acquiring IPO firms delivers better operating returns when compared to non-acquiring IPO firms in the five years after the listing. This result holds controlling for both IPO and firm-specific characteristics. Furthermore, acquiring targets already listed on the stock exchange and running stock deals are associated with the improved operating performance. Finally, we find that acquisitions also affect the newly listed companies’ survival, reducing both the time to failure and the time to being acquired, which suggest a structural acceleration of the “natural” company lifecycle.

Keywords

• mergers and acquisition
• initial public offerings
• operating performance
• strategic investments