Team Ventures and Acquisition Exits: Are Team-Founded Ventures More Likely to be Acquired?

We investigate whether team ventures are more likely to be acquired than single-founder ventures, and if so, attempt to determine what number of founders results in the highest acquisition likelihood. Using the Kauffman Firm Survey (KFS) of US businesses started in 2004, our results indicate that team-founded new ventures are more likely to be acquired, and that there is a positive and diminishing relationship between team size and acquisition likelihood. This study contributes to the understanding of drivers of exit for new ventures, and opens up the new venture exit literature to future contributions of a team demography approach.

Short interest in mergers: anomalies in the overvaluation hypothesis

Purpose High short interest is associated with overvaluation, and the purpose of this paper is to find contradictions to the commonly held “overvaluation hypothesis” when merger and acquisition (M&A) targets are examined. This paper extends the work of Ben-David et al. (2015), who confirm high short interest indicates overvaluation when focused on acquiring firms. Design/methodology/approach Short interest is examined as a predictor of acquisition likelihood using longitudinal data for US firms from 2003 to 2013. How short interest impacts the premiums paid by acquiring firms is examined with target, acquirer and deal characteristics. Findings M&A targets have high short interest and short interest increases acquisition likelihood, suggesting undervaluation. Highly shorted firms also experience outsized reductions in share price prior to merger announcements, and the premiums paid are also significantly predicted by short interest levels. Research limitations/implications Short selling activity can be motivated for reasons other than overvaluation, and many short positions can be held for long periods before they are closed, leading to high short interest levels for extended periods. Therefore, investors and researchers are cautioned that high short interest levels may exist in stocks that have already declined in price and could be poised for a reversal. Originality/value This study adds to the growing body of work indicating that short interest might not be the signal of overvaluation most researchers accept it to be.

SOLVING THE ALLY-VERSUS-ACQUIRE DILEMMA THROUGH THE DUAL LENSES OF SUBJECTIVE AND OBJECTIVE VIEWS

Nowadays many firms seek hard-to-imitate assets via allying with or acquiring other firms that own desired resources. As such, how to choose between alliances and acquisitions becomes a critical decision, and one important determinant is interfirm factors. This study probes three crucial yet underexplored interfirm differences, and develops scales to capture managers’ perceptions of the differences that, based on managerial cognition literature, dictate the ally-versus-acquire choice. Further, we argue that managers adjust their judgement across varying objective conditions. Each perceived difference is thus paired with a moderator identified respectively from the resource-based view, competitive dynamics, and collaborative capability literature. Evidences on Taiwanese firms show that a larger resource-deployment difference enhances acquisition likelihood, while greater differences in marketing praxis and human resource management increase alliance formation. Moreover, the resource-deployment difference leads to alliances for relatively younger partners, and the difference in human resource management favors acquisitions when focal firms have more interfirm governance experience.