The influence of initial sponsor backing on post-IPO acquisition activity

Mattheo Kaufmann, Sascha Kolaric and Lennart Alexander Walter

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: We investigate the impact of financial sponsor backing [venture capital (VC) or private equity (PE)] on post-initial public offerings (IPO) acquisition strategies of newly public companies. We find that PE-backed newly public firms undertake nearly three times more acquisitions than VC-backed ones and almost twice as many as non-backed firms, indicating that acquisitions are a primary growth strategy for PEs. This result remains robust after addressing potential endogeneity concerns. Additionally, PE syndicate-backed firms engage in transformative acquisitions, proxied by size, while VC-backed firms prioritise organic growth through R&D spending. Moreover, PE-backed acquirers experience significant positive long-run post-IPO stock returns, unlike VC-backed acquirers.

Date: 2024-01-26
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Published in European Financial Management 5 (2024-01-26) : pp. 2503-2555

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