Product Market Characteristics and the Choice between IPOs and Acquisitions
73 Pages Posted: 13 Jan 2010 Last revised: 10 May 2018
Date Written: August 30, 2016
Using unique U.S. Census data sets, we analyze how entrepreneurial firms’ product market characteristics affect their choice between going public, being acquired, or remaining private. Size, total factor productivity (TFP), sales growth, capital expenditure, market share, access to private funding, and human capital intensiveness significantly increase a private firm’s likelihood of an IPO relative to an acquisition. Firms in industries with less information asymmetry and higher stock liquidity are more likely to choose an IPO instead of an acquisition. While TFP peaks around either form of exit, the rate of increase in TFP prior to acquisitions and the subsequent decrease is smaller than that around IPOs.
Keywords: Initial Public Offerings, Merger and Acquisitions, Product market, exit decisions, venture capital
JEL Classification: G32, G24, G14
Suggested Citation: Suggested Citation