Edited by Mario Levis and Silvio Vismara
Chapter 19: The impact of venture capital/private equity investment on the performance of IPOs in Australia
The success of the venture capital (VC) and private equity (PE) sector is regarded as important for economic growth and innovation. Both theoretical and empirical research in the US and Europe is consistent with the proposition that VC/PE funds add value to their portfolio companies (Gompers and Lerner, 1999, 2001; Lerner, 1999, 2002a, 2002b; Kortum and Lerner, 2000; Hege et al., 2003; Gompers et al., 2005). Venture capital/private equity investors are also frequent participants in the capital markets as a method of exiting from their investments (Lerner, 1994). Empirical observations suggest that they choose the exit channel strategically and build up reputation primarily through successful initial public offerings (IPOs) (Gompers, 1996). Venture capital/private equity investors tend to hold significant ownership and board positions (Barry et al., 1990), and continue to be involved in the firm after going public (Megginson and Weiss, 1991) and thus may provide access to capital even in the post-IPO period. Finally, VC/PE investors tend to put effective management structures in place, which assist in superior long run performance (Brav and Gompers, 1997).
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