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Killer Acquisitions: Evidence from EC Merger Cases in Digital Industries

Author

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  • Ivaldi, Marc
  • Petit, Nicolas
  • Unekbas, Selçukhan

Abstract

Do established firms buy new businesses to take out future competition? Recent works in economics literature use “killer acquisitions” as a graphic concept to describe these transactions. How concerned should competition policy be? The answer to this question hinges on how much the “theory” of killer acquisitions explains. To gain insights on this, the paper studies a sample of past cases composed of all merger transactions reviewed by the European Commission (“EC”) in ICT industries. In line with the predictions of the theory, some of these cases might constitute “killer acquisitions”. Hence, the paper asks: did they lead to a reduction of competition? By focusing on perceptions of the competitors of the acquired entity as reported in financial disclosures, the paper shows that one could not observe a disappearance of the target’s products, a weakening of competing firms, and/or a post-merger lowering or absence of entry and innovation. In other words, the paper finds no factual evidence supporting the killer acquisition theory. Whilst based on small number of observations, the paper’s findings are strong. Indeed the paper’s methodology overcomes the inherent problem of lack of observing the post-merger activities of the target, and addresses the inference problem that stems from the fact that even if the target’s products are discontinued in the buyer’s firm, it is non sequitur to infer from this a post-merger weakening of competition.

Suggested Citation

  • Ivaldi, Marc & Petit, Nicolas & Unekbas, Selçukhan, 2023. "Killer Acquisitions: Evidence from EC Merger Cases in Digital Industries," TSE Working Papers 23-1420, Toulouse School of Economics (TSE), revised Oct 2024.
  • Handle: RePEc:tse:wpaper:127996
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    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2023/wp_tse_1420.pdf
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    Cited by:

    1. Laureen de Barsy & Axel Gautier, 2024. "Big Tech Acquisitions and Innovation: An Empirical Assessment," CESifo Working Paper Series 11025, CESifo.

    More about this item

    Keywords

    Killer Acquisition; Dynamic Competition; Mergers and Acquisitions; Innovation;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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