Agency theories predict that older firms make value‐destroying acquisitions to benefit managers. Neoclassical theories predict instead that such firms make wealth‐increasing acquisitions to exploit underutilized assets. Using IPO cohorts, we establish that, while younger firms make more related and diversifying acquisitions than mature firms, the acquisition rate follows a U‐shape over firms’ life cycle. Consistent with neoclassical theories, we show that acquiring firms have better performance and growth opportunities and create wealth through acquisitions of nonpublic firms throughout their life. Consistent with agency theories, older firms experience negative stock price reactions for acquisitions of public firms.