Newly Listed Firms as Acquisition Targets: The Débutant Effect of IPOs

Both theory and economic intuition suggest that newly listed firms differ from seasoned ones as potential takeover targets. We identify significant differences between the two groups of firms in this regard: (i) IPOs are more likely to be acquired than are seasoned firms, (ii) IPO targets receive higher acquisition premiums, and (iii) IPO targets are associated with greater synergy. These observations do not support the “double exit” theory that going-public presents an optimal first step of the process of selling a company, nor the argument that IPOs are weaker firms thus more vulnerable to takeover attacks. In contrast, our findings are consistent with the notion that as fresh merger candidates, IPOs are more attractive to acquirers due to greater synergy potential. JEL classification: G24, G34