The Transfer of Control in British and German IPOs

This paper analyses the evolution of ownership and control in German and UK IPOs. In a first stage we try to explain why the pre-IPO shareholders of some firms sell out whereas those of other firms do not. German IPOs are matched by size with UK IPOs to obtain a first sample and matched by industry to obtain a second sample. Ownership and control for both matched samples evolves in a different way. An empirical model based on recent theories of ownership is specified, which explains differences in ownership within and across the two countries. The main explanatory factors are different levels of risk, liquidity constraints of the initial shareholders and different levels of pre-IPO ownership concentration. In a second stage we examine whether the targets of takeovers have different characteristics than firms that become widely held. We do not find any major differences.