Browsing by Subject "Mergers and Acquisitions"

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Empirical essays on acquisitions
(2017) Kolb, Johannes; Tykvová, Tereza
ACQUISITIONS are among the most studied areas in corporate finance research. Still, many questions about acquisitions are unanswered and regularly debated in the literature. One of these questions is whether acquisitions create value for shareholders as well as stakeholders and what factors are related to value creation. The overarching question raised in this thesis is whether and how financial stakeholders and shareholders profit from acquisitions in different scenarios, i.e.: • Do bidder shareholders profit when financial advisors are involved in corporate acquisitions, and does the quality of financial advisors matter? Do high-quality advisors create more bidder shareholder value than lower quality advisors? • Do firms and SPAC shareholders profit from SPAC acquisitions? How do these firms (SPAC target firms) perform in comparison to firms that use an IPO to go public? This thesis consists of three empirical articles in which I address the above outlined questions. The first article focuses on the European market and asks whether the involvement of advisors in corporate acquisitions matters for bidder value creation. Although theoretical frameworks predict a positive relationship between advisor involvement and shareholder value creation, it is not confirmed by empirical evidence (see, e.g., Servaes and Zenner, 1996; Wang and Whyte, 2010). My results suggest that advisors provide value to their clients only when both the bidder and the target are located in the UK. Moreover, a difference-in-difference analysis, using a major European regulatory reform, indicates that advisors matter for shareholder value creation in acquisitions. The second article focuses not only on the question whether an advisor is involved in an acquisition but also on whether the quality of the advisor plays a role. In theory, high-quality advisors should be able to create more shareholder value for their clients than lower-quality advisors (see, e.g., Golubov et al., 2012). However, different authors find an insignificant, negative or positive relationship between advisor quality and value creation. Since these studies rely on advisor market shares or related measures to assess advisor quality and since evidence suggests that advisor market shares are not a good predictor of advisor performance (Bao and Edmans, 2011), we develop a new proxy to capture advisor quality. We define high-quality advisors as advisors that have won an award of excellence (i.e., best M&A house) and focus on the North American market. The results suggest that there is a positive relationship between award winners and value creation. Moreover, clients of award winners seem to outperform clients of non-award winners in the long term and seem to realize greater synergies. The results hold when we consider the endogenous choice of an advisor. Finally, it seems that award winners put more effort into acquisitions that are more visible. The last article focuses on SPAC acquisitions, which combine acquisitions with initial public offerings to enable firms a fast and cheap listing at a public stock exchange. We compare firms that use SPAC acquisitions to access the public market with firms that use IPOs to access the public market. The results from the analysis of 127 SPAC acquisitions and 1,128 IPOs during the wave of “new-generation” SPACs starting in 2003 suggest that SPAC acquisitions profit firms that are small, highly levered and have low growth opportunities in times with turbulent market environments. It seems that venture capital and private equity investors rather stick to the traditional way, the IPO, to bring their portfolio firms to the public market. Furthermore, firms that access the market via SPAC acquisitions underperform the market and similar IPO firms in the long run. The results of this thesis provide some evidence that financial advisors do play a crucial role and that shareholders might profit from their involvement in acquisitions. Moreover, innovations in financial markets that promise to improve the protection of shareholder interests, such as SPAC acquisitions, should be analyzed by the market participants with great care. On the one hand, they might provide value for certain firms (that are not able to access the public markets via an IPO); on the other hand, they seem to hurt shareholders that are interested in long-term gains.
Strategic alliances, venture capital, and their roles before IPOs and M&As
(2020) Brinster, Leonhard; Tykvová, Tereza
The research objects of this dissertation are strategic alliances, venture capital (VC), and their roles before initial public offerings (IPOs) and mergers and acquisitions (M&As) of biotechnology and pharmaceutical companies. Chapter 1 begins this dissertation with a general introduction and the motivation behind the research questions. Young and small businesses face several risks and difficulties, such as lack of access to finance. Highly innovative companies, therefore, often rely on VC finance. Firms offering VC provide not only financial capital, monitoring, and coaching, but also other useful resources and might encourage their portfolio companies to join strategic alliances. Such alliances can be beneficial for the portfolio companies because they provide new knowledge, access to scarce resources, or other synergies. In addition, engagement in one or many strategic alliances can have a positive signaling effect on outsiders, and thus, increase the probabilities of a successful exit (IPO or M&A). In Chapter 2, I analyze the role of connected VC firms in strategic alliances. This chapter is co-authored with Tereza Tykvová. A reviewed version of this chapter is published in the Journal of Corporate Finance. We study a new channel through which portfolio companies benefit from ties among venture capitalists. By tracing individual VC firms’ investment and syndication histories, we show that VC firms’ ties improve companies’ access to strategic alliance partners. While existing studies demonstrate that alliances are more frequent among companies sharing the same VC firm, we provide evidence that alliances are also more prevalent among companies indirectly connected through VC syndication networks. In addition, our results suggest that VC firms’ ties mitigate asymmetric information problems that arise when alliances are formed. Finally, we demonstrate that this type of alliance is associated with higher IPO probabilities. We also provide alternative explanations of alliance formation and address related endogeneity concerns. The research objective of the third chapter is to determine the role of strategic alliances in VC exits. This chapter is co-authored with Christian Hopp and Tereza Tykvova. A reviewed version of this chapter is published in Venture Capital. Chapter 3 contributes to a better understanding of the relationship between strategic alliances and VC exits. The recent empirical literature concludes that alliances improve the probability of successful exits for venture-backed companies. When we control for observed and unobserved heterogeneity in a cohort sample of companies, self-selection into alliance activity, and censoring, we find the effect to be smaller than evidenced in prior studies. Moreover, we confirm the positive effect of alliances only for IPOs and not M&As. These findings are consistent with the view that strategic alliances help companies certify their quality for potential buyers. Chapter 4 investigates the role of strategic alliances before M&As in more detail. This chapter is a single-authored manuscript by Leonhard Brinster. Based on a large sample of M&A deals, I estimate the role of different types of ties between companies. I distinguish related alliances into direct and indirect alliances. Related alliances provide access to more information and can reduce transaction costs by reducing the time from announcement to completion of the M&A deal. The reduction of such costs can lead to a more successful target selection and increase the transaction process efficiency of the M&A deal. This effect can be explained by trust-building, better access to private information, and certification through related alliances. The empirical results show a positive relationship between related alliances and the likelihood of an M&A. However, in contrast to other studies, I do not find statistically significant evidence that supports the hypothesis that alliances increase the post-M&A performance and that alliances are associated with higher announcement returns. Finally, Chapter 5 concludes the dissertation with a short summary of the main findings and an outlook for future research.
The phenomenon of corporate venture capital from an entrepreneurial finance perspective
(2018) Röhm, Patrick; Kuckertz, Andreas
The dissertation sheds light on several aspects of the corporate venture capital (CVC) phenomenon, and thereby contributes to the ongoing development of the research field as such. In addition to a structural literature review (Chapter 2), two studies (Chapter 3 and Chapter 4) with a special focus on the motivational drivers within the CVC dyad and two further studies (Chapter 5 and Chapter 6) were conducted. First, the investment motivation is observed at the CVC level—investigating how CVC units interpret their mission as delegated by the corporate mother. And thereby going beyond the well-established “either-or approach” of previously-published articles by focusing on the continuum between the financial and strategic investment motivation of CVC units (Chapter 3). Second, the study presented in Chapter 4 applies the framework of exploration and exploitation to scrutinize the interplay of corporate venture capital investments and subsequent startup acquisitions. The final two articles then address the application of new approaches in the context of CVC research. On the one hand in stimulating the use of isomorphic tendencies in the CVC context, and on the other hand in developing a data-cleaning procedure to enable future scholars to achieve academic rigor by identifying CVC units among the data records of information providers.
The success factors of technology-sourcing through mergers & acquisitions : an intuitive meta-analysis
(2013) Pyka, Andreas; Schön, Benjamin
With mergers & acquisitions playing an increasingly important role in today?s business world, academic research has strived to follow this trend by investigating their underlying causes and consequences. For a long time this research focused on the analysis of the financial effect of mergers & acquisitions as measured by market value or debt level. Thus, despite being a major vehicle of industry concentration and method of reallocation of resources, the technological impact of mergers & acquisitions remained comparatively underinvestigated for a long time. This, however, has changed in recent years. With the prevalence of the resource-based view and its derivates as the dominant logic in analysing today?s knowledge-intensive industries the focus shifted towards the technological aspects of mergers & acquisitions. With both mergers & acquisitions and innovation being centrepieces of competitive strategies in the modern economy, it is of central importance to understand the consequences of mergers & acquisitions for the innovative potential of firms. After more than twenty years of research in this field, it is time to take stock of what we know about the technological impact of mergers & acquisitions and its determinants. The aim of this paper is to provide an overview of the respective research by performing a meta-analysis of the empirical studies in the field. The intuitive setup allows for a detailed analysis of the individual determinants while differentiating between the impact on innovation input and output. We identify the knowledge characteristics of the partnering firms as being essential to the technological success of mergers & acquisitions. Important implications for policy makers, practitioners and future research are derived.
Where entrepreneurship and finance meet : startup valuation and acquisition in the venture capital and corporate context
(2018) Köhn, Andreas; Kuckertz, Andreas
The purpose of this dissertation is to examine the underlying determinants of startup valuation and startup acquisition in the venture capital (VC) context, with particular focus on the role of corporate venture capital (CVC). The first study—Chapter 2—titled “The determinants of startup valuation in the venture capital context: A systematic review and avenues for future research” is a systematic review of the literature on empirically examined determinants of startup valuations in the VC context. It compiles and organizes the determinants examined in 58 selected papers in an integrative framework. This framework shows that startup valuations in the VC context are shaped by factors related to three levels, namely startup, venture capitalists, and the external environment. Moreover, the review process makes it possible for the study to highlight academic voids and to outline promising paths for future research. In the second study—Chapter 3—“Exploring the differences in early-stage startup valuation across countries: An institutional perspective”, fuzzy-set qualitative comparative analysis (fsQCA) across a sample of 13 countries is applied to explore the driving factors of the institutional setting in combination with a country’s innovativeness determining high and low early-stage startup valuations across countries. Overall, the study identifies five configurations; two configurations explain the outcome of high early-stage startup valuations, and three configurations explain the outcome of low early-stage startup valuations across countries. By applying fsQCA, the study also highlights the benefits of a configurational approach to exploring the institutional determinants in combination with a country’s innovativeness underlying early-stage startup valuations in the VC context. The third study—Chapter 4—titled “A world of difference? The impact of corporate venture capitalists’ investment motivation on startup valuation” combines explorative research (computer-aided text analysis and cluster analysis) and theory-testing (hierarchical linear modeling) methods to disentangle the different types of the motivation underpinning corporate venture capitalists’ (CVCs) investments, and their impact on startup valuations. In its explorative part, the study identifies four types of CVCs’ investment motivation: financial, strategic, unfocused, and analytic. In its theory-testing part, the results show that CVCs with a strategic investment motivation assign significantly lower startup valuations, while CVCs with an unfocused investment motivation assign significantly higher valuations than their peers having an analytic motivation. Hence, the study’s findings stress the heterogeneity of CVCs, thereby moving beyond the dominant black and white approach of the current academic discourse that labels CVCs as either strategic or financial. The fourth study—Chapter 5—titled “From investment to acquisition: The impact of exploration and exploitation on CVC acquisition” forms a bridge to the previous study by investigating the interplay of CVC investments and startup acquisitions drawing on the framework of exploration and exploitation. The study exploits a unique and diligently constructed dataset to shed light on the phenomenon of CVC acquisitions (i.e., a corporate mother acquiring a startup funded through its CVC unit) using computer-aided text analysis and logistic regression. The findings show that corporate mothers with a greater degree of explorative (exploitative) orientation are more (less) likely to engage in a CVC acquisition; and that this effect is negatively (positively) moderated by the extent of product market relatedness between startup and the potential acquirer. Taken as a whole, this dissertation is interested in the hitherto empirically studied determinants influencing startup valuations in the VC context; how the institutional setting affects early-stage startup valuations; the differing investment motivations of CVCs and their impact on the startup valuations assigned; and the underlying drivers of CVC acquisitions. To address these aspects, the dissertation draws on multiple streams of academic literature and various analytical methods. In doing so, this dissertation provides new and important insights that enhance the understanding of the entrepreneurial process by painting a more complete picture of the factors affecting the valuation and acquisition of startups in the VC context. Notwithstanding the dissertation’s contributions, it also discusses its limitations in outlining promising paths for future research. In sum, this dissertation can clearly serve as a door opener for future research seeking to further illuminate these under-researched, but crucial events in the entrepreneurial process.