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The dynamics of mergers and acquisitions in oligopolistic industries

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  • Hackbarth, Dirk
  • Miao, Jianjun

Abstract

This paper embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers arise endogenously and vary stochastically over time. We find that (i) mergers are more likely in more concentrated industries; (ii) mergers are more likely in industries that are more exposed to industry-wide shocks; (iii) returns to merger and rival firms arising from restructuring are higher in more concentrated industries; (iv) increased industry competition delays the timing of mergers; (v) in sufficiently concentrated industries, bidder competition induces a bid premium that declines with product market competition; and (vi) mergers are more likely and yield larger returns in industries with higher dispersion in firm size.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 4 ()
Pages: 585-609

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:4:p:585-609

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Anticompetitive effect; Industry structure; Real options; Takeovers;

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References

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Citations

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Cited by:
  1. Muendler, Marc-Andreas, 2014. "Export or Merge? Proximity vs. Concentration in Product Space," CAGE Online Working Paper Series 180, Competitive Advantage in the Global Economy (CAGE).
  2. Habib, Michel A. & Mella-Barral, Pierre, 2013. "Skills, core capabilities, and the choice between merging, allying, and trading assets," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 31-48.
  3. Lukas, Elmar & Welling, Andreas, 2014. "On the investment–uncertainty relationship: A game theoretic real option approach," Finance Research Letters, Elsevier, vol. 11(1), pages 25-35.
  4. García-Feijóo, Luis & Madura, Jeff & Ngo, Thanh, 2012. "Impact of industry characteristics on the method of payment in mergers," Journal of Economics and Business, Elsevier, vol. 64(4), pages 261-274.
  5. repec:cge:warwcg:179 is not listed on IDEAS
  6. Heitor Almeida & Murillo Campello & Dirk Hackbarth, 2011. "Liquidity Mergers," NBER Working Papers 16724, National Bureau of Economic Research, Inc.
  7. Andrey Malenko & Alexander Gorbenko, 2013. "Means of payment and timing of mergers and acquisitions in a dynamic economy," 2013 Meeting Papers 928, Society for Economic Dynamics.
  8. Strebulaev, Ilya A. & Whited, Toni M., 2012. "Dynamic Models and Structural Estimation in Corporate Finance," Foundations and Trends(R) in Finance, now publishers, vol. 6(1–2), pages 1-163, November.

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