Corporate venture capitalists often invest in start-up companies to identify the right businesses to purchase later. In fact, according to David Benson of Brigham Young University and Rosemarie Ziedonis of the University of Oregon, 20 percent of acquisitions made by the companies with the largest corporate venture capital operations were in businesses that their venture capital arms had previously invested.
Benson and Ziedonis find a surprising pattern in these purchases. In a forthcoming article in Journal of Financial Economics, they report that when companies purchased startups in their venture capital portfolios, shareholder value was typically reduced by $63 million.
This didn’t happen when the companies bought businesses in which they had not invested. In these acquisitions, shareholder value typically increased by $8.5 million.
To read the full, original article click on this link: Acquisitions of Corporate Venture Capital Portfolio Companies
Author: Scott Shane
