Performance of Buyout IPO’s as compared to Non Buyout IPO’s in the UK

TALREJA, KARISHMA (2009) Performance of Buyout IPO’s as compared to Non Buyout IPO’s in the UK. [Dissertation (University of Nottingham only)] (Unpublished)

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Purpose – The aim of the paper is to compare the performance of buyout firms to non buyout firms of UK, post the initial public offerings (IPOs). The aim is achieved by examining the post IPO financial performance of the two groups by analyzing the absolute accounting statistics. The results from analyzing the accounting data is further confirmed then, with the testing of the cash flow statics that are less prone to accounting manipulation with the Mann Whitney U test.

Design/Methodology/Approach – Majority of the literature review provided has been found to be in favor of buyouts performing well in the long run. This has been further proven with the long run performance comparison of the buyout and non buyout companies in the 1 year post IPO (short run), 3 year post IPO (medium run) and 5 year post IPO (long run). Further, a Mann Whitney U test has confirmed the findings based on significant test results.

Findings – It was found that the buyouts on an average at the time of the IPO in the given sample were relatively large firms with respect to the market value. It is also found that performance of buyout firms on an average in the 1 year, 3 years and 5 years post IPO was superior in terms of all the accounting parameters considered. Also the Mann Whitney U test with cash flow statics were all found to be significant for the buyout firms; thus confirming the preliminary results of buyouts performing and out doing the non buyout firms post IPO.

Research limitations/Implications – There is a great need for future research to focus on ownership structure and long-run returns. Further, a focus on the level of debt and venture capital financing in the pre-IPO period, the reputation and the overall grandstanding effect may also uncover important relationships with the long-run performance of a buyout firm post IPO. This dissertation uses a univariate approach; however future research into the topic with a multivariate approach would be of more assistance.

Practical Implications – The results obtained from this study provide important information for the prospective long term investors in new issues. Pre-IPO performance of a firm cannot predict the post-IPO performance with certainty. Nevertheless, the results of this study suggest that long-term investors can with caution invest in IPO firms that were previously buyouts since they seem to show higher performance post IPO too.

Originality/Value – The paper studies the comparison of post-IPO buyout and non buyout firm performance by relating it to the various literature reviews. Statistical significance has been proven with accounting and cash flow parameters to measure the difference appropriately.

Keywords Company performance, Buyout firms, Non buyout firms, IPO, United Kingdom

Paper type: Research paper

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 03 Feb 2010 12:28
Last Modified: 16 Oct 2016 23:56

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