School of Business publications portal
This portal is no longer updated. Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2012
Thesis number: 12776
Desire to acquire - Acquisition appetite of newly public firms, European evidence
Author: Seraste, Milla
Title: Desire to acquire - Acquisition appetite of newly public firms, European evidence
Year: 2012  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; yritykset; companies; listautuminen; listed companies; yrityskaupat; corporate acquisitions
Pages: 72
Key terms: Initial public offering; IPO; acquisition; M&A; primary proceeds; subsequent capital raised; CAPEX and R&D

The purpose of this Thesis is to examine, if attractive acquisition opportunities drive the Initial Public Offering (IPO) decision in the EU15 countries. In this Thesis, I hypothesize that newly public firms conduct acquisitions at a torrid pace compared to their pre-IPO acquisition activity. Further, I study if the IPO firms are more active acquirers compared to their more mature public industry peers and examine, if the post-IPO external growth of the newly public firms outpaces their internal growth through CAPEX and R&D during five years after the IPO. Finally, I test whether relevant explanatory variables such as primary proceeds raised in the IPO, subsequent capital raised from the public debt and equity markets and the IPO underpricing have implications on the acquisition activity of the recent IPO firms.


The empirical analysis conducted in this Thesis is based on 1,915 IPOs carried out in EU15 countries during 1995-2005. Further, I have collected a large M&A sample of altogether 96,929 acquisitions conducted by EU15 bidders during 1990-2010. From the overall sample of acquisitions, the IPO firms were involved as bidders in 611 and 5,515 transactions before and after the IPO, respectively. The IPO and the M&A samples were retrieved from the SDC New Issues Database. In addition, I derived market and accounting variables from the Thomson Financial Worldscope and Datastream databases.


My results provide strong evidence that improved access to public debt and equity markets may drive the IPO decision in the EU15 countries. Based on the univariate analysis, the IPO firms appear to enter into acquisitions as bidders significantly more often and with higher spending in comparison to their pre-IPO M&A activity. However, the acquisition frequency does not seem to exceed that of mature firms in the same industries. The multivariate Probit, Poisson and OLS regression analyses suggest that in addition to the firm size, subsequent capital raised from the public debt and equity markets has significant explanatory power in predicting the post-IPO acquisition likelihood, amounts and volumes. However, according to my results, primary proceeds raised in the IPO are most likely used to finance organic growth.
Master's theses are stored at Learning Centre in Otaniemi.