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The Negative Effects of Mergers and Acquisitions on the Value of Rivals

Author

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  • Derrien, François
  • Frésard, Laurent
  • Slabik, Victoria
  • Valta, Philip

Abstract

Average stock price reactions of industry rivals in horizontal U.S. mergers and acquisitions around deal announcements are robustly negative. This finding is in contrast to the results in the existing literature, which focuses on smaller samples of deals involving mostly publicly listed firms. Rivals’ returns are more negative in growing and concentrated industries. Moreover, the negative rivals’ stock price reactions are related to future decreases in operating performance, increased probability of bankruptcy and challenges by antitrust authorities, and increased probability of rivals’ future acquisitions. Overall, these results suggest that M&As have strong competitive effects for the rivals of target companies.

Suggested Citation

  • Derrien, François & Frésard, Laurent & Slabik, Victoria & Valta, Philip, 2017. "The Negative Effects of Mergers and Acquisitions on the Value of Rivals," HEC Research Papers Series 1204, HEC Paris, revised 04 Oct 2017.
    • Handle: RePEc:ebg:heccah:1204
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    Cited by:

    1. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2018. "Threatening to buy: Private equity buyouts and antitrust policy," Economics Letters, Elsevier, vol. 164(C), pages 31-34.

    More about this item

    Keywords

    M&As;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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