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Real market concentration through partial acquisitions


  • Charléty-Lepers, Patricia

    () (ESSEC Business school)

  • Fagart, Marie-Cécile

    () (University of Rouen and CREST-LEI (Center for Research in Economics and Statistics-Laboratory of industrial economics))

  • Souam, Saïd

    () (University of Tours and CREST-LEI (Center for Research in Economics and Statistics-Laboratory of industrial economics))


We study horizontal partial acquisitions in an oligopolistic industry in the absence of synergies. Contrary to existing results, we find that a dominant shareholder may choose to acquire shares in a competitor although the aggregate profit of the group of firms under his control, and even the greater group of firms in which he has a stake, is reduced. This is due to a “favorite” effect: after the acquisition, the dominant shareholder will favor the firm in which he eventually holds the relatively higher share to the detriment of shareholders of the other firms. For this reason, a block of shares can be bought at a discount when the value of the firm of the initiator decreases post acquisition. Moreover, we show that the existence of initial silent toeholds in rivals enhances the incentive for a dominant shareholder to buy shares in other firms in the industry, whereas controlling ones may discourage them.

Suggested Citation

  • Charléty-Lepers, Patricia & Fagart, Marie-Cécile & Souam, Saïd, 2004. "Real market concentration through partial acquisitions," ESSEC Working Papers DR 04004, ESSEC Research Center, ESSEC Business School.
  • Handle: RePEc:ebg:essewp:dr-04004

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    Horizontal partial acquisitions; Real market concentration; Dominant shareholder; Minority shareholders; Silent interests;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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