Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers

Prior research does not consider the case of IPO firms making frequent acquisitions after going public and treat all transactions as a one-time deal. We distinguish between frequent and infrequent acquirers and find that the first deal of frequent acquirers does not negatively affect the long-run performance of initial public offerings (IPOs); however, the second deal does. We also find that frequent acquirers experience significantly poorer performance in the five years following the IPO. The cumulative average abnormal returns for one through four years based on industry, size, and book-to-market ratio matching method are −20.07% for frequent acquirers as compared to −6.22% for infrequent acquirers. Further, we find that frequent acquirers are less likely to survive in the five years following the IPO than single acquirers are. We confirm that investors are overoptimistic about the decision to acquire within the first year of going public.