We study shareholder returns for firms that acquired five or more public, private, and0or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.Takeovers are one of the most important events in corporate finance, both for a firm and the economy. Extensive research has shown that shareholders in target firms gain significantly and that wealth is created at the announcement of takeovers~i.e., combined bidder and target returns are positive!. However, we know much less about the effects of takeovers on the shareholders of acquiring firms. Evidence suggests that these shareholders earn, on average, a zero abnormal return at the acquisition's announcement, though there is tremendous variation in these returns. Researchers have been unable to successfully explain much of this variation, partially because the announcement of a takeover reveals information about numerous things. For example, Grinblatt and Titman~2002, p. 708! state that the stock return at the time of the bid cannot be completely attributed to the expected effect of the acquisition on profitability, arguing that, "the stock returns of the bidder at the time of the announcement of the bid may tell us more about how the market is reassessing the bidder's business than it does about the

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"We study two alternative means to move assets from private to public ownership: through the acquisition of private companies by firms that are public (sellouts) or through initial public share offerings (IPOs). We consider firm-specific characteristics for 1,074 IPO and 735 sellout firms to identify differences in growth, capital constraints, and asymmetric information between the two types of transactions. Our results suggest that firms move to public ownership through an IPO when they have greater growth opportunities and face more capital constraints. We provide a better understanding of the firm-specific characteristics that lead firms to go public." Copyright 2008 Financial Management Association International..

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