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| Author: | Reuer, J. Shen, J.-C. |
| Title: | The extended merger and acquisition process: understanding the role of IPOs in corporate strategy |
| Journal: | European Management Journal
2003 : APR, VOL. 21:2, p. 192-198 |
| Index terms: | Mergers Corporate strategy Initial public offerings Private companies |
| Freeterms: | Divestitures |
| Language: | eng |
| Abstract: | In contrast to prior Merger and Acquisition research, the authors take the perspective of the sell-side and investigate a private firm's decision to sell itself outright versus engage in alliances orundertake an IPO beforehand. They develop the argument that sequential divestiture via IPOs can serve to mitigate ex ante transaction costs in the M&A market under two general conditions: (1) when search costs are non-trivial because potential ability of exchange partners is incomplete, and (2) when information asymmetries pose valuation challenges. Consistent with these arguments, the empirical results suggest that sequential divestiture via IPOs is more likely in industries with spatially-dispersed firms and for firms with significant intangible resources. |
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