Brander Egan (2007) - The Role of VCs in Acquisitions

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Has year 2007
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©, 2016


This is a Working Paper. Please do not distribute.

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Work on the current revisions is here: VC Acquisitions Paper (Access is restricted)


Brander, James A. and Edward J. Egan (2008), "The Role of Venture Capitalists in Acquisitions", University of British Columbia, Working Paper. Proceedings of the Annual Conference, Administrative Science Association of Canada, Banff, Alberta (June ‘06),



Acquisitions, Venture Capital, Information Technology, Information Asymmetry


We study the effect of venture capital on returns to acquisitions of privately-held enterprises. One hypothesis is that venture capital provides “certification” of acquisition target quality under asymmetric information and therefore yields higher acquisition prices. An alternative “bargaining” hypothesis is that venture capitalists obtain higher acquisition prices through superior bargaining. An event study of U.S. acquisitions in the 1980-2006 period indicates that venture capital lowers abnormal returns (implying higher acquisition prices) for Information Technology (IT) acquisitions but not for other acquisitions. As evidence suggests that IT has relatively high levels of informational asymmetry, our analysis favors the certification hypothesis.


This paper has been submitted to and rejected from:

  • JF: The Journal of Finance (submitted Sept '05, rejected immediately)
  • JSBM: The Journal of Small Business Management (submitted Oct '06, rejected after 2 revisions)
  • JBV: The Journal of Business Venturing (submitted Jan '07, rejected after 2 revisions)
  • RFS: Review of Financial Studies (submitted Apr '08, rejected immediately)
  • JBF: The Journal of Banking and Finance (submitted '09?, rejected immediately)

A rebuild and full revision of this paper (see: VC Acquisitions Paper) was submitted to and rejected from:

  • RCFS: Review of Corporate Finance Studies (submitted '12, rejected immediately)

This paper was presented at:

  • The Annual Conference, Administrative Science Association of Canada, Banff, Alberta (June ‘06)

This paper is currently:

  • WP: An unpublished working paper