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The Effect of Lead VC Presence on the Probability and Outcome of Merger-Related Litigation

Posted: 27 Oct 2020

See all articles by Anup Basnet

Anup Basnet

University of Surrey

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: June 20, 2020

Abstract

Employing a sample of 697 M&A offers for VC-backed IPO companies from 1996 to 2018, we find that takeover bids that occur in the presence of lead VCs command a higher initial premium and are less likely to be legally contested compared to bids for companies from which the lead VC has already exited. In addition, these companies enjoy higher stock price returns in response to the M&A announcement and muted price declines around the litigation date. We also document the importance of several lead VC characteristics in determining their portfolio companies’ litigation risk.

Keywords: M&A Offers, Merger-Related Litigation, Venture Capitalists, Takeover Premium

JEL Classification: G24, G34, K41

Suggested Citation

Basnet, Anup and Walker, Thomas John, The Effect of Lead VC Presence on the Probability and Outcome of Merger-Related Litigation (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3692870

Anup Basnet (Contact Author)

University of Surrey ( email )

Alexander Fleming Rd
Guildford, GU2 7XH
United Kingdom

HOME PAGE: http://https://www.surrey.ac.uk/people/anup-basnet

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

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