The information gap in the M&A market hinders acquirers from effectively identifying high-quality targets. We examine whether VC/PEs convey information content in the M&A market and whether acquirers can use s...The information gap in the M&A market hinders acquirers from effectively identifying high-quality targets. We examine whether VC/PEs convey information content in the M&A market and whether acquirers can use such information to identify high-quality targets. We show that VC/PEs have significant information content and can signal high-quality target companies via ‘‘certification". When acquirers lack acquisition experience and targets are located in inferior information environments, VC/PE ‘‘certification" is more significant.The better reputation a VC/PE has, the more information it conveys. Syndicate VC/PEs convey stronger information than independent VC/PEs. We also find that acquirers do not pay higher premiums for high-quality targets. Overall, our results suggest that VC/PEs have value relevance in the M&A market,confirming their ‘‘certification" role. We present means for acquirers to select high-quality targets and investors to build efficient portfolios.展开更多
基金by the National Natural Science Foundation of China (Project Nos. 71702038 71572201+1 种基金 71672204)the Natural Science Foundation of Guangdong Province (Project No. 2015A030313074)
文摘The information gap in the M&A market hinders acquirers from effectively identifying high-quality targets. We examine whether VC/PEs convey information content in the M&A market and whether acquirers can use such information to identify high-quality targets. We show that VC/PEs have significant information content and can signal high-quality target companies via ‘‘certification". When acquirers lack acquisition experience and targets are located in inferior information environments, VC/PE ‘‘certification" is more significant.The better reputation a VC/PE has, the more information it conveys. Syndicate VC/PEs convey stronger information than independent VC/PEs. We also find that acquirers do not pay higher premiums for high-quality targets. Overall, our results suggest that VC/PEs have value relevance in the M&A market,confirming their ‘‘certification" role. We present means for acquirers to select high-quality targets and investors to build efficient portfolios.
