TY - JOUR
T1 - Does venture capital syndication affect mergers and acquisitions?
AU - Nguyen, Giang
AU - Vu, Le
PY - 2021/4
Y1 - 2021/4
N2 - We find that venture capital (VC) syndicate-backed targets receive higher acquisition premiums and spend more time negotiating transaction terms. The acquirers of syndicate-backed targets receive lower cumulative abnormal returns surrounding the acquisition announcement, but they outperform the individual-backed targets in the long-term. We show that VC syndication creates value for entrepreneurial firms by leading to larger and more independent boards of directors prior to acquisition. It also leads to better incentive alignment between the CEO and the shareholders of the acquiring firm. In addition, syndicate-backed targets prefer stock as the method of payment in mergers and acquisitions. Collectively, we show that VC syndication creates value for both entrepreneurial firms and their acquirers in the long-term.
AB - We find that venture capital (VC) syndicate-backed targets receive higher acquisition premiums and spend more time negotiating transaction terms. The acquirers of syndicate-backed targets receive lower cumulative abnormal returns surrounding the acquisition announcement, but they outperform the individual-backed targets in the long-term. We show that VC syndication creates value for entrepreneurial firms by leading to larger and more independent boards of directors prior to acquisition. It also leads to better incentive alignment between the CEO and the shareholders of the acquiring firm. In addition, syndicate-backed targets prefer stock as the method of payment in mergers and acquisitions. Collectively, we show that VC syndication creates value for both entrepreneurial firms and their acquirers in the long-term.
KW - Merger and acquisition
KW - Syndication
KW - Venture capital
UR - http://www.scopus.com/inward/record.url?scp=85098795975&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2020.101851
DO - 10.1016/j.jcorpfin.2020.101851
M3 - Article
AN - SCOPUS:85098795975
SN - 0929-1199
VL - 67
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 101851
ER -