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Dual-track versus single-track sell-outs: An empirical analysis of competing harvest strategies

2008; Elsevier BV; Volume: 25; Issue: 4 Linguagem: Inglês

10.1016/j.jbusvent.2008.10.009

1873-2003

James C. Brau, Ninon K. Sutton, Nile W. Hatch,

Working Capital and Financial Performance

We investigate two non-traditional harvest strategies for selling a privately-held company. Dual-track private firms file for an IPO while also courting acquirers. These firms withdraw the IPO to be taken over. Dual-track public firms complete an IPO and are taken over shortly thereafter. Examining 679 takeovers from 1995–2004, we find private dual-track sell-outs earn a 22–26% higher premium and dual-track public sell-outs earn an 18–21% higher premium than single-track sell-outs. Larger, VC-backed, prestigious underwritten, and bubble-year firms have a higher propensity to take the dual-track path. The implication is that entrepreneurs may increase their harvest value by using a dual-track strategy.