2020 Fiscal Year Research-status Report
Venture Capital Financing and Methods of Payment in Mergers and Acquisitions.
| Project/Area Number |
20K13530
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| Research Institution | Waseda University |
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Principal Investigator |
NGUYEN GIANG 早稲田大学, 政治経済学術院, 講師(任期付) (70835462)
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| Project Period (FY) |
2020-04-01 – 2024-03-31
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| Keywords | Venture Capital / Syndication / Premium / Method of Payment / Long-term Performance |
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| Outline of Annual Research Achievements |
The research shows 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. In addition, syndicate-backed targets prefer stock as the method of payment in mergers and acquisitions.
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| Current Status of Research Progress |
Current Status of Research Progress
1: Research has progressed more than it was originally planned.
Reason
Our results are published in a high-impacted journal, Journal of Corporate Finance, as they demonstrate that venture capital syndication is value-adding (to both the target and acquirer), especially when their portfolio firms exit through mergers and acquisitions. And one possible mechanism is through holding stock in the acquiring firm which increase its long-term performance.
The other research paper (a more generalized one) is also completed. It is under revised and resubmit at Management Science. Though we received many questions from reviewers, we worked hard on the questions and response to the editors and reviewers. Our results show strong relationship between venture capital and stock payment in mergers and acquisitions.
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| Strategy for Future Research Activity |
The published results show that venture capital syndication benefits the target at the announcement date and the acquirer in the long-term. We show that VC syndicates may have interest in holding acquirer shares and add value to the acquirer in the long-term.
Our next research paper focuses on venture capital and methods of payment in more details. We investigate why venture capital firms want to hold the acquirer shares, and which types of venture capital firms want to hold acquirer shares. For example, we investigate how venture capital firms' private equity/corporate venture capital status, reputation, and investment interests affect their equity preference in the acquiring firms. Overall, we continue to to support the value-added hypothesis of venture capital.
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