Search

This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers' 5-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement. The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare. [ABSTRACT FROM AUTHOR]

It is well‐established in the literature that a horizontal merger in a supply chain is profitable (or beneficial to firms at another tier) if the merger synergy exceeds some threshold referred to as the profitable (or beneficial) threshold. Our paper goes one step further by finding that the profitable threshold is always lower than the beneficial threshold, which implies that a firm may have an incentive to prevent a horizontal merger between its suppliers or customers, but never wants to precipitate one. Moreover, we propose a strategy to achieve the preventive goal—a firm can develop an instrumental merger option with another rival firm, which can help prevent the target merger in one of two ways. First, if the synergy of the instrumental merger is high relative to the synergy of the target merger, the firm can carry out the instrumental merger—even an unprofitable one—preemptively to make the target merger unprofitable. Second, if the synergy of the target merger is not too high and the synergy of the instrumental merger is moderate, that is, the instrumental merger is profitable and will inflict severe harm on the firms in the target merger, the firm can reserve the instrumental merger option as a deterrent and the profitable target merger is deterred. An interesting implication of the deterrent role of the instrumental merger option is that when the firm has two candidate merger partners, it may choose the partner with a lower synergy for the deterrence purpose. [ABSTRACT FROM AUTHOR]

This paper examines firms' post‐merger integration (PMI) strategy under price and service‐quality competition when facing either deterministic or stochastic demand. Although horizontal mergers are prevalent in practice and have been analyzed extensively in the literature, little attention has been paid to the choice of PMI level. We develop a game‐theoretic model, in which multiple firms compete on price and service quality with either deterministic or stochastic demand, and two of them decide whether and how to merge. The post‐merger firm can enjoy higher cost efficiency due to cost synergy and needs to choose between centralized and decentralized mergers (i.e., PMI level). A centralized merger allows centralized decision‐making and inventory pooling for the two participant firms, while a decentralized merger allows decentralized decision‐making and inventory transshipment between the participant firms. We highlight some interesting findings. First, under either deterministic or stochastic demand, we find that a centralized merger is not always beneficial since its collusion effect may induce the nonparticipant firm to adopt more aggressive strategies, and thus a decentralized merger may be more profitable and preferred by the post‐merger firm as it allows competition between the participants and leads to a more balanced market. Second, in a decentralized merger, stronger fixed cost synergy may backfire and hurt each participant as it could intensify service‐quality competition between the two participants, and risk pooling (via inventory transshipment) under stochastic demand may even reduce the participant firms' profits as it may intensify both service‐quality and price competition. Third, a participant firm's service quality, price, and in‐stock probability may be either improved or reduced after merging, depending on the PMI level, cost synergy, demand sensitivity, and demand uncertainty. [ABSTRACT FROM AUTHOR]

We consider a horizontally differentiated oligopoly and investigate the relationship between merger cost savings and network effects for the incentives of firms to merge and for the postmerger welfare outcomes. We show that it is more profitable to be an insider rather than an outsider of the merger, unless both cost savings and network effects are too low. Mergers can improve customer and total welfare provided both cost savings and network effects are high enough. We find that the possibility for network effects to lead to a Pareto improvement through merger is shown to depend on the number of outside firms. [ABSTRACT FROM AUTHOR]

In 2021, President Biden issued an executive order that addressed the negative implications of market concentration within the healthcare industry. Specifically, President Biden called for the revision of the Horizontal and Vertical Merger Guidelines to enact antitrust safeguards that limit unchecked hospital mergers and promote competition. This Article delves into the role of the healthcare sector in the U.S. economy and how the current state of hospital mergers limits competition and, thus, the quality of care available to patients. Further, this Article studies U.S. federal regulations, case law, and merger retrospectives to uncover pitfalls within the current Horizontal Merger Guidelines. In conclusion, this Article proposes adding hospital-specific language and more context for merger efficiencies to the guidelines as a remedy for its current anticompetitive consequences. [ABSTRACT FROM AUTHOR]

This paper advances Motta's (2004) study of two-firm Bertrand mergers with arbitrary synergies in symmetric linear models to m -firm mergers with cost-savings in asymmetric linear models. It identifies a set of Bertrand mergers that reduce not only consumer surplus but also rival firms' profits. Such severely anti-competitive mergers are intriguing because they can never happen in both Farrell and Shapiro (1990) and Nocke and Schutz (2018). • It advances Motta's (2004) two-firm mergers to m-firm with non-arbitrary synergy. • It finds a set of mergers that reduce both consumer surplus and outsiders' profits. • It provides simplified and previously unavailable expressions of equilibria. [ABSTRACT FROM AUTHOR]

It is well understood that vertical mergers can create an incentive for the merged firm to foreclose unintegrated rivals, and that one way this foreclosure can manifest itself is by driving an unintegrated rival below its minimum viable scale and causing it to exit. The central claims of this article are (1) that exit-inducing mergers are likely to be especially harmful because they result in the elimination of a competitor and (2) that even a modest amount of foreclosure can induce exit if the rival was not too far above its minimum viable scale before the merger. I argue that exit-inducing mergers merit explicit treatment in a revised version of the DOJ/FTC Vertical Merger Guidelines, both because they are harmful and because the possibility that they may occur with only modest foreclosure has important implications for how they should be investigated. [ABSTRACT FROM AUTHOR]

The article focuses on Horizontal Merger Guidelines as per which the federal antitrust agencies have followed, and which the courts have accepted. It mentions Guidelines focus on ensuring that the combined entity does not have increased market power in specific drug markets, which includes ensuring that the buyer of any divested products can compete with the merged entity. It also mentions approach adequately addresses competitive concerns.

From our beginning, the fight for resources and the human wish of growth and wealth leaded to a competitive behaviour of individuals and, by extension, that of their economic undertakings. While some developed an economic outlook on competition, there were some authors further adding the legal component as a governing principle of competition. In the spirit of a form-based approach, early EU competition law aimed to insure the economic freedom, missing openness towards certain practices. The founding Treaties, the modifying ones and the European acts in the field outlined the safeguarding of the internal market as a goal of competition law. Still, an important source of European competition law was offered to us by the case law. The shift towards the effects-based approach ensued the regulation as ex-post assessments of the merger impact on competition were undertaken. Different implications of Merger Control in EU competition law will be discussed in this paper, one which follows the spectacular evolution of the impact of different European Decisions on the change of competition law. The paper is a study on evolution of the Merger control and the analysis how much impacted two European Commission decisions prohibiting mergers the Single Market the reforms of each regulation development before each one of them.

The article discusses the case of New York versus Deutsche Telekom AG, which mentions two errors in Deutsche Telekom representing deficiencies in modern antitrust law that must be corrected to accurately regulate mergers in dynamic markets. It provides a primer on horizontal mergers and highlights evidence used by the court in its efforts to predict the future of the telecommunications market. Scholars and litigators must update the analytical framework of antitrust law to reflect the changes.

The article aims at contributing to philosophical understanding of issues in international political economy (IPE). The philosophical formations of different approaches to conducting research in IPE demonstrate that all its divisions are conditional, with permeable rather than impenetrable boundaries. To simplify introduction, some IPE textbooks follow Robert Gilpin’s “trichotomous categorisation”, or theoretical division of the field into realism, liberalism and Marxism/structuralism, which fails to clearly define cultural and historical roots, ignores alternative philosophical approaches to IPE, and denies the possibility of theoretical mergers. With the main focus on the notion of power, this article aims at exploring the possible ways to overcome this trichotomous theoretical division, making the attempt to find ground for theoretical merger. The paper concludes that the theoretical boundaries can be transcended by merging different concepts (a “horizontal” merger), or by approaching the same phenomena in different epistemological ways (a “vertical” merger).

Starting in the 1980s, market concentration began to rise dramatically decreasing competition and increasing market power for the firms that remain. Such developments have important effects on a number of economic variables such as the efficiency of our economy and income inequality. Thus, it is important to ask: how has the administration of antitrust policy changed over the last half century? To shed more light on these important questions, we explore both change in policy outline by the Department of Justice in its Horizontal Merger Guidelines and change in administrative actions looking at both secondary requests for mergers and acquisitions of different sizes, and pre, post and change in Herfindahl–Hirschman Index in mergers and acquisitions contested by the Department of Justice through the courts. [ABSTRACT FROM AUTHOR]

From our beginning, the fight for resources and the human wish of growth and wealth leaded to a competitive behaviour of individuals and, by extension, that of their economic undertakings. While some developed an economic outlook on competition, there were some authors further adding the legal component as a governing principle of competition. In the spirit of a form-based approach, early EU competition law aimed to insure the economic freedom, missing openness towards certain practices. The founding Treaties, the modifying ones and the European acts in the field outlined the safeguarding of the internal market as a goal of competition law. Still, an important source of European competition law was offered to us by the case law. The shift towards the effects-based approach ensued the regulation as ex-post assessments of the merger impact on competition were undertaken. Different implications of Merger Control in EU competition law will be discussed in this paper, one which follows the spectacular evolution of the impact of different European Decisions on the change of competition law. The paper is a study on evolution of the Merger control and the analysis how much impacted two European Commission decisions prohibiting mergers the Single Market the reforms of each regulation development before each one of them. [ABSTRACT FROM AUTHOR]

This study explores the independent and interactive effects of procedural justice and informational justice on post-deal value creation in large, related acquisitions. Our results show that informational justice and procedural justice affect different components of value creation. Procedural justice is critical in realizing market position improvements following the integration process, while informational justice is essential in achieving market position gains during integration and financial return gains both during and post-integration. Indicating that the interrelationships between different justice dimensions may be more complex than previously thought, we find that procedural justice reduces the positive effects of informational justice on financial return during the integration process, while it magnifies the effects of informational justice on the combined firms' market position during integration efforts. We explore the implications of these results for future research on the acquisition integration process and for practicing managers engaging in large, related acquisitions. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Previous research on mergers and acquisitions has neglected the issue of speed of postmerger integration by and large. This paper argues that there are benefits and detriments associated with speed of integration. Thus, in some situations speed may be highly beneficial whereas in others it may be harmful to the success of a merger or acquisition. It is argued that the benefits and detriments of speed of integration depend on the magnitude of internal and external relatedness between the merging firms prior to the merger or acquisition. Results from a survey of 232 horizontal mergers and acquisitions show that speed is most beneficial when external relatedness is low and at the same time internal relatedness is high. In contrast, speed is highly detrimental in the case of low internal and high external relatedness. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper examines how value is created in horizontal mergers and acquisitions. More specifically, it examines the impact of post-acquisition asset divestiture and resource redeployment on the long-term performance of horizontal acquisitions. The data come from a detailed survey of acquiring firm managers and cover 253 horizontal mergers and acquisitions that were initiated by European and U.S. firms in manufacturing industries for the period 1988–1992. This study incorporates insights from the cost efficiency and resource-based theories to propose a model of the effects of asset divestiture and resource redeployment on long-term acquisition performance. Overall, our results show that both asset divestiture and resource redeployment can contribute to acquisition performance, with, however, a significant risk of damaging acquisition performance when the divested assets and redeployed resources are those of the target. [ABSTRACT FROM AUTHOR]

We study a horizontal merger in an oligopolistic market in which firms compete on production quantities. Each firm has its own in‐house manufacturing facility, and the production is subject to random yield. After the consolidation of two firms, the merged entity can use both manufacturing facilities that belong to the merging firms. It is well known that diversification can reduce the aggregate supply uncertainty of a firm, but this diversification benefit has not been explored in a merger analysis. We model the effects of reduced competition, cost synergy, and supply diversification from a merger and characterize their combined impact on firms' production quantities and expected profits. Our analysis highlights the importance of yield correlation. In the postmerger model, although an increase in yield correlation intensifies end‐market competition and lowers the diversification benefit, it can increase the merged firm's expected profit. This is more likely to occur as the synergy effect increases, the number of competing firm increases, and the yield variance decreases. We also compare the premerger and postmerger equilibrium production quantity and expected profit of each firm. We show that there exists threshold levels of cost synergy above (or below) which the postmerger equilibrium profits or quantities exceed their premerger counterparts. We also show that, under yield uncertainty, firms may have an incentive to merge even without cost synergy due to the diversification benefit. With deterministic demand, cost synergy is necessary to justify a merger. [ABSTRACT FROM AUTHOR]

I analyze horizontal mergers in procurement settings in which sellers incur costs to participate. Considering existing sellers' contest-level entry differs from antitrust authorities' typical emphasis on new sellers' market-level entry to counteract a merger's anticompetitive harm. I show that profitable mergers can increase consumer and total surplus by inducing more and stronger contest-level entry by the merged seller, which echoes common claims from merging parties that their merger is beneficial because it creates a stronger competitor. This finding suggests caution by antitrust authorities: when contest-level entry costs matter, standard models that ignore those costs prescribe blocking procompetitive mergers. [ABSTRACT FROM AUTHOR]

The article provides a brief overview of the new European Union theory of harm to innovation competition. It mentions economics of significant impediment to effective innovation competition by the way of merger. It also informs on a court case Dow/DuPont which involved a horizontal merger between two large suppliers of crop protection chemicals.

The article offers an appraisal of the innovation theory of harm from an economic perspective. It highlights the works of Massimo Motta and Emanuele Tarantino on the conditions under which horizontal mergers affect innovation adversely. It also informs that horizontal mergers do not reduce competition uniformly but rather increase the market power of a subset of the firms.

A trio of Court of Appeal decisions under s 47 of the Commerce Act 1986 (NZ), if read consistently, support the presence of a structural presumption in horizontal merger regulation in New Zealand. Because the burden of persuasion in merger clearance proceedings lies with the applicant, the Commission could therefore rely on a significant increase in concentration in an already concentrated market as prime facie evidence of a substantial lessening of competition. A merger may be likely to substantially lessen competition even where the probability of that occurring is less than an even chance. To be consistent, the applicant should be required to produce strong evidence to show that entry or expansion is highly likely to occur, to exclude a real chance that it would not occur, in order for the merger to be cleared. The outcome is consistent with a large body of economic research showing that horizontal mergers in concentrated markets are highly likely to lessen competition. [ABSTRACT FROM AUTHOR]

The article presents information on legal developments in marketing relative to the regulation of monopolistic methods. The article begins by discusses the revision of the National Association of Attorneys General Merger Guidelines as they pertain to the alignment of state and federal practices on horizontal mergers. Among other actions, the article discusses the case of United States v. Brown University and the participation of many top U.S. universities and colleges in the Ivy Overlap Group, which was found guilty of participating in price fixing agreements and eliminating financial competition for minority applicants. The article suggests that educational marketers examine their own institutional behavior. Several other cases are noted and their marketing implications discussed.

This study examined the impact of strategic similarities between target and bidder firms on changes in postmerger performance. Set in the U.S. banking industry, the empirical examination shows that mergers between banks exhibiting similar strategic characteristics result in better performance than those involving strategically dissimilar banks. [ABSTRACT FROM AUTHOR]

The resource-based perspective suggests that firms are bundles of assets, some of which are fungible in nature. To the extent that some resources are fungible, firms should be able to redeploy them to enter new markets when their existing businesses decline. On the other hand, perspectives that emphasize the business-specific nature of routines or managerial skills point to inherent risks in organizational transformation. In a declining market, resources can be redeployed within the firm through diversification-oriented acquisitions, or they can be redeployed through market mechanisms through consolidation-oriented acquisitions. In this paper, we examine the differences in performance outcomes between diversification-oriented acquisitions and consolidation-oriented acquisitions in industries within the defense sector, which have experienced significant decline. Our results indicate that consolidation-oriented acquisitions outperform diversification-oriented acquisitions in the decline phase of their industries in terms of both ex ante (stock market based) and ex post (operating) performance measures. At the corporate level, we find a positive relationship between focus and Tobin's q, even when the industry is in decline. The implication of our results is that assets from declining industries are redeployed more effectively through market mechanisms than within the firm through the acquisition of complementary assets. [ABSTRACT FROM AUTHOR]

This paper studies redeployment of resources between target and acquiring businesses following horizontal acquisitions. The analysis draws from perspectives that emphasize the strategic importance of resources that are subject to market failure. We define a five-part typology of R&D, manufacturing, marketing, managerial, and financial resources. We show that targets and acquirers frequently redeploy resources following horizontal acquisitions, especially resources that frequently face market failure. We then show that the magnitude of redeployment of each type of resource increases with the asymmetry of the merging businesses' relative strength on the resource dimension. The research stresses evolutionary perspectives on business organizations that emphasize the importance of organizational differences in competitive markets. The central premise of our research is that the market for businesses is often more robust than the market for resources. [ABSTRACT FROM AUTHOR]

The 1980s acquisitions are widely believed to have unwound the conglomerate boom of 1960s through horizontal mergers, yet alternative forms of unwinding have not been examined. This study tests the explanation that changes in the opportunity to share resources and activities among businesses of the firm may have contributed to post acquisition performance improvements in the recent acquisition wave. After estimating sources of competitive performance that are due to these changes within each of 356 manufacturing industries, the study calculates predictions of changes in competitive performance for each acquired business between 1980 and 1984. These predictions are positive and in turn are positively associated with change in competitive performance between 1984 and 1986. This finding highlights the importance of resource sharing and activity sharing in these acquisitions and leads to the reexamination of theories for the second acquisition wave that are supported by the finding of horizontal acquisitions. [ABSTRACT FROM AUTHOR]

While the U.S. has pursued a vigorous antitrust policy towards horizontal mergers over the past four decades, mergers in Canada have until recently been permitted to take place in a virtually unrestricted antitrust environment. The absence of an antitrust overhang in Canada presents an interesting opportunity to test the conjecture that the rigid market share and concentration criteria of the U.S. policy effectively deters a significant number of potentially collusive mergers. The effective deterrence hypothesis implies that the probability of a horizontal merger being anticompetitive is higher in Canada than in the U.S. However, parameters in cross-sectional regressions reject the market power hypothesis on samples of both U.S. and Canadian mergers. Judging from the Canadian evidence, there simply isn't much to deter. [ABSTRACT FROM AUTHOR]

Conglomerate mergers are the most prevalent and the most controversial of the three types of mergers--horizontal, vertical and conglomerate. The controversy stems in part from the marketing possibilities inherent in some conglomerate mergers, but it also stems, unfortunately, from basic misconceptions of the meaning of these mergers. The present article, based on an analysis of conglomerate mergers in the history of the 1950 Amendment to Section 7 of the Clayton Act, indicates the nature and origin of the disagreement on the meaning. The author presents criteria for determining when a merger is, in part or whole, a conglomerate merger. [ABSTRACT FROM AUTHOR]

The article presents information on legal developments in marketing relative to the regulation of monopolistic methods. In reference to market control, a legal action against Bliss & Laughlin Inc. in the U.S. is cited. In this case, the district court ruled that the company's acquisition of the Sierra Drawn Steel Corp. did not violate the antimerger laws. Since the passage of the CelIer-Kefauver Amendment to Section 7 of the Clayton Act, horizontal mergers have been treated severely by the courts. In regard to collusive practices, the case of Harold J. Silver Municipal Securities Co. v. New York Stock Exchange is cited. In this case, the Exchange's conspiring to deprive Silver of wire services was found to be legal.

A question that bedevils the academic economist, the trustbuster, and the community at large is whether conglomerate merger activity is a force for good or evil. In common with horizontal and vertical merger activity, the critical consideration is whether conglomerate mergers produce better uses of resources, increases in monopoly power, or some mixture of these two results. Economists have been examining these mergers in an effort to determine whether efficiency in the use of resources is, in fact, promoted. However, when investigating this question, the subject of inquiry is usually confined to the optimizing decision of the firm. It has been argued that conglomerate activity involves the best use of resources from the standpoint of the firm. [ABSTRACT FROM PUBLISHER]

More and more companies are coming to realize the significance of a suitable corporate strategy to the continued prosperity of their enterprises. The best approaches to the development of a corporate strategy, however, are not clear. In this article I want to say a few words about the meaning of strategy, to illustrate two current major forces that underscore the necessity for skillfully developed company strategies, and then to examine three key factors of great importance in developing an aggressive corporate strategy. [ABSTRACT FROM AUTHOR]