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Trade Sale versus IPO as Exit Strategy - An Empirical Analysis of European and US VC Backed Biotechnology Companies
Journal
Austin Journal of Business Administration and Management
Type
journal article
Date Issued
2017-10-16
Author(s)
Kutz, Rebecca
Abstract
This paper studies the influence factors that characterize a trade sale versus an IPO exit strategy of VC-backed biotechnology companies. Using a dataset of 142 European and US privately held companies, exiting between 2005 and the second quarter of 2014, this paper addresses VC investment structure variables as well as firm- and product-specific variables to examine the decision of VCs to either use the trade sale or the IPO strategy. It was found that the IPO exit strategy calls for higher investments, is financed by more investors, requires more financing rounds, and takes longer for VCs to exit. An interdependency of these four variables is shown. Additionally, firms with pre-clinical products show higher probabilities for trade sale exits, whereas firms with marketed products and/or revenues are more likely to go public. Furthermore, the size of a firm is positively related to the probability of an IPO exit. Finally, firms whose lead product belongs to the field of oncology or is biologic in nature, and/or firms with technology platforms do not show a higher probability to exit via one of the two exit strategies considered.
Language
English
Keywords
Venture capital
Biotechnology
Exit strategies
IPO
Trade sale
Principal component analysis
Logistic regression
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Volume
1
Number
4
Start page
1
End page
16
Pages
16
Subject(s)
Division(s)
Eprints ID
254104