Post IPO Mergers and Acquisitions Strategies: Evidence from India

Background/Objectives: This paper examines three years post initial public offering (IPO) corporate strategies of Indian firms to understand whether firm characteristics impact post IPO growth strategies of firms. Method/Analysis: A sample of firms that completed Initial Public offerings during the period 2001 to 2011 and data on mergers and acquisitions during the period 2000 to 2014 has been extracted from the Bloomberg data base. This data set is combined with firm level financials data from CMIE prowess. Two logistic models, one where the outcome is making an acquisition and the other where the outcome is becoming a target, have been used to identify characteristics of firms that make acquisitions or become targets of acquisitions within three years of an IPO. Findings: The main finding of the study is that there is a higher probability of larger firms undertaking acquisitions post IPO. However, younger firms, with lower promoter holdings and lower profitability are more likely to be targets of acquisitions within three years of an IPO. Applications/Improvements: This study introduces a new theme to the current literature by incorporating IPO and M&A strategies in a more integrated framework by studying empirically the choices – to be an acquirer or to be a target - available to a firm in India.