English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Zendy Plus

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Zendy Tools

Zendy Open

A private firm’s exit decision has been modeled in the existing empirical literature as a dichotomous choice between IPO and acquisition. In this paper, we take a dynamic approach and analyze how explicitly accounting for dynamic considerations, such as the benefits arising from being acquired after going public at higher valuations relative to a direct acquisition, or the costs arising from being delisted at lower valuations, alters the initial IPO vs. acquisition trade-off. We find that firms that are more viable against product market competition, characterized by larger private benefits of control and lower information asymmetry, are more likely to choose an IPO over a direct acquisition as initial exit mechanism. Then, firms that are more viable in the product market and are able to reduce information asymmetry to a greater extent by going public are more likely to be acquired post-IPO, while firms characterized by lower product market viability and higher information asymmetry are more likely to be delisted. We document that two-stage acquisitions are a valuable exit route for firms, that are acquired at a 44.7% premium, on average, compared to the valuation they could have obtained in a direct acquisition. This premium is higher for firms with more viable business models and affected by lower information asymmetry. On the other hand, firms that are delisted post-IPO suffer from a 31.9% valuation discount relative to a direct acquisition. Our evidence indicates that explicitly accounting for the benefits and costs arising from post-IPO considerations will tend to push private firms with higher product market viability and lower information asymmetry more towards choosing an IPO rather than an acquisition as initial exit mechanism.

Two Stage Exits: An Empirical Analysis of the Dynamic Choice between IPOs and Acquisitions by European Private Firms