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Bargaining power and industry dependence in mergers

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  • Ahern, Kenneth R.

Abstract

In contrast to the widely held belief that targets capture the lion's share of merger gains, I show that the average dollar gains to targets are only modestly more than the dollar gains to acquirers. To help explain the variation in merger outcomes, I present empirical evidence in support of a new hypothesis that a target's relative scarcity (proxied by its market power) and product market dependence (proxied by customer–supplier relations) help to explain its share of the total merger gains. These results provide new evidence for an unexplored role of product markets on bargaining outcomes in mergers.

Suggested Citation

  • Ahern, Kenneth R., 2012. "Bargaining power and industry dependence in mergers," Journal of Financial Economics, Elsevier, vol. 103(3), pages 530-550.
    • Handle: RePEc:eee:jfinec:v:103:y:2012:i:3:p:530-550
    DOI: 10.1016/j.jfineco.2011.09.003
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    More about this item

    Keywords

    Mergers and acquisitions; Division of gains; Product market relations; Bargaining;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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