The choice of IPO versus M&A: evidence from banking industry

Bill Francis, Iftekhar Hasan and Dona Siregar

Applied Financial Economics, 2009, vol. 19, issue 24, 1987-2007

Abstract: This study investigates factors influencing private banks' exit strategy between going public (Initial Public Offering (IPO)) and being a target in Merger and Acquisitions (M&A). Evidence indicates that a bank with high liquidity, operating in a geographical deregulatory environment is more likely to go for the M&A option. Larger and older institutions, improved economic environment, increased recent trend of choosing IPOs and smaller difference in premiums paid between the alternative choices are likely to encourage banks to opt for IPO as an exit strategy. We observe the existence of self-selection in making the exit choice and find that the average transaction value of bank IPOs (M&As) would have been higher (lower) had the banks chosen to engage in M&A (IPOs).

Date: 2009
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DOI: 10.1080/09603100903251262

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