Strategic Choice or Failed Attempt? Acquisition Consequences of IPO Withdrawals

Abstract

Drawing on Nordic IPO filings from 1985 to 2023, this thesis investigates the post-withdrawal pathways of 492 withdrawn offerings, with particular emphasis on subsequent M&A valuation outcomes and acquirer announcement returns. Results indicate that 39% of firms remain private within the designated event window, defined as two years prior to and five years following the planned IPO, 31% are acquired, 8% refile for an IPO with 6% doing so successfully, and 21% become inactive. Across firms involved in M&A, the analysis reveals that withdrawn IPO targets are acquired at valuations approximately 824% higher than comparable pure private targets, highlighting significant valuation benefits associated with IPO filings. This challenges the perception of IPO withdrawals as definitive failures and instead underscores their potential role as deliberate strategic decisions. However, results also indicate that while both withdrawn and completed IPOs experience positive valuation revisions from their pre-IPO valuations to subsequent M&A valuations, the magnitude of the uplift is approximately 21% lower for withdrawn firms. These findings imply the presence of a market-imposed penalty or adverse perception associated with IPO withdrawals, suggesting that the comprehensive valuation benefits derived from completing a public listing generally exceed the signaling value conveyed by the act of filing alone. Despite this, pre-withdrawal acquisitions yield higher valuation revisions for withdrawn IPOs, further underscoring the strategic viability and valuation advantages associated with IPO withdrawals. Notably, pre-initial filing private capital backing does not confer any significant valuation advantages. Event study analysis offers further empirical insight by demonstrating a hierarchical pattern in announcement-day cumulative abnormal returns, with acquisitions of pure private targets yielding the highest acquirer returns, public targets the lowest, and withdrawn IPO targets falling in between. A modest but statistically significant long-run premium is also observed for withdrawn targets, whereas no such effect is found for public or pure private targets. Ultimately, the findings reinforce the view of IPO withdrawals as a legitimate strategic option, revealing considerable value creation opportunities for both acquirers and targets in the Nordic region, thereby contributing to broader economic efficiency and social welfare.