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'''[[Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies]]''' ([[Media:Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies.pdf|pdf]])
@article{gompers2006role,
title={The role of venture capitalists in the acquisition of private companies},
author={Gompers, P. and Xuan, Y.},
journal={Unpublished working paper. Harvard University},
year={2006},
abstract={In this paper, we examine the characteristics of acquisition of private firms by public companies and explore the impact that venture capital-backing has on the acquirer's characteristics, form of payment, announcement returns, as well as long-run stock price and operating performance. We find that compared to the acquirers of other private companies, those firms that acquire private venture capital-backed companies tend to be larger, have higher Tobin's Q, and are more likely to use equity in the transaction and buy companies in a related industry. The market tends to react more negative to announcement of the acquisition of a venture capital-backed company, but the long-run stock market and operating performance is superior than other private acquisitions. We find that the use of stock and related transaction predicts better long-run performance. Our results suggest that the acquirers of private venture capital-backed companies do not suffer any adverse selection problem and continue to have superior performance in the long-run. },
filename={Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies.pdf}
→Key Papers
abstract={We study the relation between venture capital (VC) backing and the profitability of privately held firm acquisitions. Controlling for endogeneity in venture funding, we document that acquisitions of VC-backed targets lead to significantly higher acquirer announcement returns than non VC-backed acquisitions. Acquirer announcement returns are also substantially larger when the acquisitions are equity financed. We evaluate five hypotheses, four of which pertain to various VC conflicts of interest with other investors, to explain the cross section of acquirer announcement returns and target purchase price-to-book value ratios. We find evidence that higher acquirer returns and lower target purchase price-to-book value ratios are in part caused by liquidity pressures on VC funds nearing their termination dates. Acquisitions of targets backed by VCs with close financial ties to the acquirers have significantly higher acquirer announcement returns and lower target purchase price-to-book value ratios. This evidence is consistent with a VC moral hazard problem where VC incentives to obtain higher target purchase prices are compromised by their dual financial relationships. Corporate venture capitalists (CVC) have strategic as well as financial goals, which create conflicts with other venture investors. Consistent with CVC conflicts of interest, acquisitions of firms backed by CVCs exhibit higher acquirer stock returns. We also uncover evidence that the shifting strategic objectives of CVC parents and their weak commitment to the VC market lead to rapid exits from their VC portfolio firms and higher wealth gains for acquiring firms. In summary, we find support for several hypotheses concerning VC conflicts of interests with other investors for explaining higher acquirer announcement returns when targets are VC-backed.},
filename={Masulis Nahata Way (2006) - Venture Capital Conflicts Of Interest.pdf}
}
'''[[Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies]]''' ([[Media:Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies.pdf|pdf]])
@article{gompers2006role,
title={The role of venture capitalists in the acquisition of private companies},
author={Gompers, P. and Xuan, Y.},
journal={Unpublished working paper. Harvard University},
year={2006},
abstract={In this paper, we examine the characteristics of acquisition of private firms by public companies and explore the impact that venture capital-backing has on the acquirer's characteristics, form of payment, announcement returns, as well as long-run stock price and operating performance. We find that compared to the acquirers of other private companies, those firms that acquire private venture capital-backed companies tend to be larger, have higher Tobin's Q, and are more likely to use equity in the transaction and buy companies in a related industry. The market tends to react more negative to announcement of the acquisition of a venture capital-backed company, but the long-run stock market and operating performance is superior than other private acquisitions. We find that the use of stock and related transaction predicts better long-run performance. Our results suggest that the acquirers of private venture capital-backed companies do not suffer any adverse selection problem and continue to have superior performance in the long-run. },
filename={Gompers Xuan (2006) - The Role Of Venture Capitalists In The Acquisition Of Private Companies.pdf}
}
abstract={This paper studies the role of common venture capital investors in alleviating asymmetric information between public acquirers and private venture capital-backed targets. We find that acquisition announcement returns are more positive for acquisitions in which both the target and the acquirer are financed by the same venture capital firm. Similarly, having a common investor increases both the likelihood that a transaction will be all equity-financed as well as the fraction of stock in the overall acquisition payment. In addition, an acquisition is more likely to take place when there is a common venture capital investor linking the acquirer and the target. Our results suggest that common venture capital investors can form a bridge between acquiring and target firms that reduces asymmetric information associated with the transaction for both parties.},
filename={Gompers Xuan (2008) - Bridge Building In Venture Capital Backed Acquisitions.pdf}
}
