Industry relatedness in trade sales and venture capital investment returns

Ann-Kristin Achleitner, Reiner Braun (), Eva Lutz and Uwe Reiner

Small Business Economics, 2014, vol. 43, issue 3, 637 pages

Abstract: We investigate relationships between the industry relatedness of venture capital-backed companies and their strategic acquirer in trade sales and the achieved investment returns of venture capitalists. Using a proprietary data set of 716 trade sales, we analyze return differences between lateral and synergetic trade sales, as well as between horizontal and vertical trade sales. We find that venture capitalists achieve higher returns with lateral rather than synergetic trade sales, and that the difference is greater for deals involving early stage companies characterized by strong information asymmetries. In addition, horizontal trade sales yield higher returns than vertical trade sales; however, in boom phases of the venture capital market, this effect reverses. Finally, we find that experienced venture capitalists are able to overcome disadvantageous situations in trade sales, resulting in comparable returns across all trade sale categories. Copyright Springer Science+Business Media New York 2014

Keywords: Trade sale; Venture capital; Venture capital exit; Industry relatedness; Investment rate of return; G24; G31; L26; M13 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11187-014-9557-5

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