The delisting by M&A of venture capital-backed companies in Europe: a story of two tales

This paper investigates the role of Venture Capital (VC) in the likelihood of delisting via mergers and acquisitions (M&A) for European
companies listed in the 2004–2014 period, till 2020. Takeovers of
listed companies are generally associated with underperformance,
suggesting a need for a change in corporate control. In contrast, we
show that VC-backed listed companies are more likely to be
acquired when they exhibit higher growth rates compared to
their peers. Moreover, this effect is driven by companies backed
by low-reputation VCs. These VCs are known to rush their portfolio
ventures to IPO and to have a limited post-IPO involvement. These
conditions, combined with strong growth, may attract acquirers
who perceive a need for change in corporate control. Conversely,
we find no evidence of an increased likelihood of delisting by M&A
in companies backed by highly reputed VCs, which tend to remain
independent.