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Incentives for Partial Acquisitions and Real Market Concentration

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  • Patricia Charléty

    (CEPN - Centre d'Economie de l'Université de Paris Nord (ancienne affiliation) - Université Paris XIII - Paris Nord - CNRS : UMR7115)

  • Marie-Cécile Fagart

    (CEPN - Centre d'Economie de l'Université de Paris Nord (ancienne affiliation) - Université Paris XIII - Paris Nord - CNRS : UMR7115)

  • Saïd Souam

    (CEPN - Centre d'Economie de l'Université de Paris Nord (ancienne affiliation) - Université Paris XIII - Paris Nord - CNRS : UMR7115)

Abstract

We analyze the incentives of a controlling shareholder of a firm to acquire, directly or indirectly through his firm, shares in a competitor. We charaterize the conditions under which these partial acquisitions as well as the equilibrium toehold and its nature: controlling or silent. We find that while this shareholder gains, the acquisition is detrimental to minority shareholders of his firm, or of the target, or even of both. We show that the incentives are enhanced if the dominant shareholder initially holds silent stakes in rivals while controlling interests may discourage them. Moreover, we find that partial acquisitions always lead to a decrease in the joint profit of the two firms involved, and an increase in competitor's profits as the market becomes less competitive.

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Bibliographic Info

Paper provided by HAL in its series CEPN Working Papers with number hal-00143911.

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Date of creation: 27 Apr 2007
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Handle: RePEc:hal:cepnwp:hal-00143911

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00143911
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Keywords: horizontal partial acquisitions ; real market concentration ; dominant shareholder ; minority shareholders ; silent interests.;

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  1. Malueg, David A., 1992. "Collusive behavior and partial ownership of rivals," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 27-34, March.
  2. Patricia Charlety & Marie-Cécile Fagart & Saïd Souam, 2001. "Prises de participations et expropriation des actionnaires minoritaires," Working Papers 2001-42, Centre de Recherche en Economie et Statistique.
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Cited by:
  1. Karle, H. & Klein, T.J. & Stahl, K.O., 2011. "Ownership and Control in a Competitive Industry," Discussion Paper 2011-026, Tilburg University, Center for Economic Research.

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