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Mergers and Partial Ownership

Author

Listed:
  • Foros, Øystein

    () (Dept of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Kind, Hans Jarle

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Shaffer, Greg

    (University of Rochester and University of East Anglia)

Abstract

In this paper we compare the profitability of a merger to the pro…tability of a partial ownership arrangement and …nd that partial ownership arrangements can be more profiable for the acquiring and acquired firm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firms. In a dual context, we show that a cross-majority owner may have incentives to sell a fraction of the shares in one of the firms he controls to a silent investor who is outside the industry. Aggregate ex post operating profit in the two firms controlled by the cross-majority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better o¤ with than without the partial divestiture.

Suggested Citation

  • Foros, Øystein & Kind, Hans Jarle & Shaffer, Greg, 2010. "Mergers and Partial Ownership," Discussion Paper Series in Economics 1/2010, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2010_001
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    References listed on IDEAS

    as
    1. Showalter, Dean M, 1995. "Oligopoly and Financial Structure: Comment," American Economic Review, American Economic Association, vol. 85(3), pages 647-653, June.
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    Citations

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    Cited by:

    1. Fiocco, Raffaele, 2016. "The strategic value of partial vertical integration," European Economic Review, Elsevier, vol. 89(C), pages 284-302.
    2. Torben Stühmeier, 2016. "Competition and Corporate Control in Partial Ownership Acquisitions," Journal of Industry, Competition and Trade, Springer, vol. 16(3), pages 297-308, September.
    3. Jovanovic, Dragan & Wey, Christian, 2014. "Passive partial ownership, sneaky takeovers, and merger control," Economics Letters, Elsevier, vol. 125(1), pages 32-35.
    4. Heiko Karle & Tobias J. Klein & Konrad O. Stahl, 2011. "Ownership and Control in a Competitive Industry," CESifo Working Paper Series 3380, CESifo Group Munich.
    5. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.
    6. Shekhar, Shiva & Wey, Christian, 2017. "Uncertain merger synergies, passive partial ownership, and merger control," DICE Discussion Papers 260, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    7. repec:spr:epolin:v:44:y:2017:i:3:d:10.1007_s40812-016-0053-6 is not listed on IDEAS
    8. Bivand, Roger, 2011. "Geocomputation and open source software: components and software stacks," Discussion Paper Series in Economics 23/2011, Norwegian School of Economics, Department of Economics.
    9. Brito, Duarte & Cabral, Luís & Vasconcelos, Helder, 2014. "Divesting ownership in a rival," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 9-24.
    10. Samuel de Haas & Johannes Paha, 2016. "Partial cross ownership and collusion," MAGKS Papers on Economics 201632, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    Media economics; Mergers; Corporate Control; Financial Control;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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