The Value of Strategic Alliances in Acquisitions and IPOs

Authors

  • Jianping Qi,

  • Ninon K. Sutton,

  • Qiancheng Zheng

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    • Jianping Qi is a Professor of Finance and Bank of America Professor in the Muma College of Business at the University of South Florida, in Tampa, FL. Ninon K. Sutton is a Professor of Finance and Bank of America Professor in the Muma College of Business at the University of South Florida, in Tampa, FL. Qiancheng Zheng is a Visiting Assistant Professor in the Department of Finance in the Muma College of Business at the University of South Florida, in Tampa, FL.


  • We thank Raghu Rau (Editor) and an anonymous referee for insightful suggestions that greatly improved the paper. We also thank the participants at the SFA 2012 Annual Meeting, Daniel Bradley, Christos Pantzalis, and Delroy Hunter for valuable and helpful comments. All remaining errors are our own.

Abstract

This paper investigates how firms’ strategic alliance experience affects their valuations as acquisition targets or in initial public offerings (IPOs). We propose that alliance experience serves as a valuable signaling device for opaque firms. The results show that takeover targets with alliance experience receive higher premiums than those without such experience. More recent alliance experience as well as alliances in the same industry also contributes to a larger target gain. Similarly, IPO firms that have alliance experience obtain higher valuations than those without the experience. Finally, alliance experience increases the likelihood that private firms exit by going public rather than being acquired.

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