Merger Control with Transfers from the Capital Gains Tax

This work proposes to rely on the capital gains tax legislation to introduce transfers in merger control. Transfers are never used in merger regulation, however they can represent a relevant device to extract information on synergies. The implicit transfer collected thanks to the capital gains tax, associated with divestitures, allows to screen among high and low synergy achievers. The analysis focuses on the fact that the transfer is scally constrained. It must be strictly positive but lower than a threshold; the capital gains tax paid by target shareholders depends on the ratio of cash used by the bidder as a medium of paiement in the takeover bid and on the tax rate. The upper scal constraint combined with a non monotonic consumer surplus function allow the inecient type to enjoy a rent, and affect the usual rent-efficiency trade-o. The lower scal constraint induces the ecient type's divestitures to be distorted downward from the rst best.