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Small Business Economics

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01.02.2013

Completing the technology transfer process: M&As of science-based IPOs

verfasst von: Michele Meoli, Stefano Paleari, Silvio Vismara

Erschienen in: Small Business Economics | Ausgabe 2/2013

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Abstract

This paper investigates the valuation and merger and acquisition (M&A) dynamics of the population of 254 biotech firms that went public in Europe between 1990 and 2009. Among these, we identify a high proportion (40%) of firms affiliated with a university or another public research organization. After controlling for intellectual capital and other possible determinants, we find that affiliation with a university is recognized as beneficial by investors. This affiliation enhances the valuation of the firms and the probability of being targeted in subsequent M&As, particularly in cross-border deals. We conclude that following the initial public offering acquisitions by incumbent firms are mechanisms to finalize the technology transfer process started in a research institute. Our findings allow us to derive implications for venture investors, academic entrepreneurs, university managers, and policymakers.

Vorheriger Artikel Creating good public policy to support high-growth firms

Nächster Artikel The influence of age on SMEs’ growth determinants: empirical evidence

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An alternative specification that limits the analysis to the cases of companies that were officially born as university or academic spin-offs has been tested. Results are confirmed at a lower level of significance, due to the smaller number of cases available.

EURIPO (www.euripo.eu) is a database of European IPOs built and managed by Universoft, a spin-off company of the University of Bergamo. See Cogliati et al. (2011) for a description of the database. The industry classification is the official one adopted by the European stock exchanges, namely, the Industry Classification Benchmark (ICB). To identify biotech companies, we refer to code 4573, which is Healthcare (45)—Pharmaceuticals & Biotechnology (7)—Biotechnology (3). Our definition, and as a result our sample, differs from other, broader definitions of biotechnology including, for example, firms conducting agriculture research.

Subsection 4.4 is dedicated to a comparison between countries.

Economic theory assumes that the difference between market value and book value is the present value of a company’s future abnormal earnings, the latter resulting from either monopoly power or innovation. The Q value for a firm is defined as the ratio of the market value of the outstanding financial claims on the firm to the current replacement cost of the firm’s assets. This ratio has been accepted as an important measure for firm valuation and used to explain a wide variety of economic phenomena.

This means an average of 1.79 M&As per IPO-firm, if we consider only the 148 firms involved in at least one deal. The data source on M&A deals was the Thomson One Banker Deals database, which relies on other sources, such as stock exchange commissions, trade publications, law firms, and investment bank surveys. Our sample firms could be targeted in several M&A transactions, because M&As do not refer exclusively to the combination of two companies to form a new company. The raw data were checked to eliminate double-counting of transactions. Deals were identified by the cut-off ownership levels for mandatory disclosures required by national laws. In all of the jurisdictions evaluated, there was a formal obligation that required major shareholders to disclose their holdings in a company.

We considered the number of patents to which the firm had exclusive rights at the date of public offering, as published in the prospectus. Thus, the measure captures not only patents issued directly to the firm, but also patents acquired through arrangements with other firms. When missing, the patent variable was completed by measuring the number of patents as reported by the US and by the European Patent Office issued to the firm up to the date of the IPO.

The upper echelon consists of board members and top managers. The benefits of having prestigious members in both categories at the time of IPO registration are well known. Executives with lustrous credentials and experience may be more capable of leading a company through the IPO transition (Fischer and Pollock 2004), and prestigious outside directors can reassure markets that the firm will be able to secure scarce resources. In the regression analysis, we controlled for the relational and educational capital of the upper echelon (advisory role) as well as board-independence and corporate governance mechanisms (agency role). Relying on the definition of upper echelons allows us to better account for differences in the design and functioning of top management teams across national borders (Glunk et al. 2001).

Similar to previous studies, we measured Tobin’s Q as the ratio of market value of assets to the book value of assets, where the market value is calculated as the sum of the book value of assets and the market value of common stock less the book value of common stock. However, we performed the regression analysis by using alternative measures as well (e.g., the ratio of the market value of equity over the book value of equity or the ratio of market value of equity over sales), but the results did not change significantly.

Results are robust to alternative specifications where we used as dependent variable either the number of cross-border deals, or the number of cross-border deals as target, or the relative number of cross-border deals on the total number of deals.

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Titel: Completing the technology transfer process: M&As of science-based IPOs
verfasst von: Michele Meoli
Stefano Paleari
Silvio Vismara
Publikationsdatum: 01.02.2013
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 2/2013
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-012-9416-1

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