Using a hand-collected data set of private firm
acquisitions and IPOs, this paper presents an empirical
analysis of a private firm’s choice between IPOs and
acquisitions, and develops the first empirical analysis
in the literature of the “IPO valuation premium puzzle”
(where many private firms seem to choose to be acquired
rather than to go public at higher valuations). In the
first part of the paper, I test several new hypotheses
regarding a firm's choice between IPOs and acquisitions.
My analysis of private firm valuations in IPOs and
acquisitions in the second part of the paper indicates
that IPO valuation premia disappear for larger firms
after controlling for various factors affecting a firm’s
choice between IPOs and acquisitions. pdf 2006
