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Incentives for Partial Acquisitions and Real Market Concentration

  • Patricia Charléty

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

  • Marie-Cécile Fagart

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

  • Saïd Souam

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

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

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Date of creation: 05 May 2007
Date of revision:
Handle: RePEc:hal:cepnwp:hal-00143911
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  1. Eirik S. Amundsen & Lars Bergman, 2002. "Will Cross-Ownership Re-Establish Market Power in the Nordic Power Market?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-95.
  2. Malueg, David A., 1992. "Collusive behavior and partial ownership of rivals," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 27-34, March.
  3. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 191-205, June.
  4. 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.
  5. Barclay, Michael J. & Holderness, Clifford G., 1989. "Private benefits from control of public corporations," Journal of Financial Economics, Elsevier, vol. 25(2), pages 371-395, December.
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