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Merger Failures

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  • Albert Banal‐Estañol
  • Jo Seldeslachts

Abstract

This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre‐ and post‐merger processes. We argue that failure may stem from informational asymmetries arising from the pre‐merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post‐merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.

Suggested Citation

  • Albert Banal‐Estañol & Jo Seldeslachts, 2011. "Merger Failures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 589-624, June.
  • Handle: RePEc:bla:jemstr:v:20:y:2011:i:2:p:589-624
    DOI: 10.1111/j.1530-9134.2011.00298.x
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    Cited by:

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    2. Kenta Tanaka and Shunsuke Managi, 2013. "Measuring Productivity Gains from Deregulation of the Japanese Urban Gas Industry," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    3. Onur A. Koska & Frank Stähler, 2014. "Optimal Acquisition Strategies in Unknown Territories," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(3), pages 406-426, September.
    4. Banal-Estanol, A. & Heidhues, P., 2006. "Merged clusters during economic booms," Working Papers 06/07, Department of Economics, City University London.
    5. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    6. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
    7. Anca-Simona HROMEI, 2013. "Reasons For Mergers And Their Impact On Companies," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 1, pages 82-88, June.
    8. Frey, Rainer & Hussinger, Katrin, 2006. "The Role of Technology in M&As: A Firm Level Comparison of Cross-Border and Domestic Deals," ZEW Discussion Papers 06-069, ZEW - Leibniz Centre for European Economic Research.
    9. repec:cmj:journl:y:2013:i:27:hromeias is not listed on IDEAS
    10. Feiqiong Chen & Qiaoshuang Meng & Fei Li, 2017. "How resource information backgrounds trigger post-merger integration and technology innovation? A dynamic analysis of resource similarity and complementarity," Computational and Mathematical Organization Theory, Springer, vol. 23(2), pages 167-198, June.
    11. Feiqiong Chen & Qiaoshuang Meng & Fei Li, 0. "How resource information backgrounds trigger post-merger integration and technology innovation? A dynamic analysis of resource similarity and complementarity," Computational and Mathematical Organization Theory, Springer, vol. 0, pages 1-32.
    12. Banal-Estanol, Albert & Macho-Stadler, Ines & Seldeslachts, Jo, 2008. "Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 69-91, January.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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