“Venture Capital Investments and Merger and Acquisition Activity around the World” by Gordon M. Phillips
Gordon M. Phillips
Dartmouth College, Tuck School of Business and NBER
Penn State University
We examine the relation between venture capital (VC) investments and mergers and acquisitions (M&A) activity around the world. We find evidence of a strong positive association between VC investments and lagged M&A activity, consistent with the hypothesis that an active M&A market provides viable exit opportunities for VC companies and therefore incentivizes them to engage in more deals. We also explore the effects of country-level pro-takeover legislation passed internationally (positive shocks) and US state-level antitakeover business combination laws (negative shocks) on VC activity. We find significant post-law changes in VC activity. VC activity intensifies after enactment of country-level takeover friendly legislation and decreases following passage of state
antitakeover laws in the U.S.