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The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger

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  • Joseph A. Clougherty
  • Tomaso Duso

Abstract

It is commonly perceived that firms do not want to be outsiders to a merger between competitor firms. We instead argue that it is beneficial to be a non-merging rival firm to a large horizontal merger. Using a sample of mergers with expert-identification of relevant rivals and the event-study methodology, we find rivals generally experience positive abnormal returns at the merger announcement date. Further, we find that the stock reaction of rivals to merger events is not sensitive to merger waves; hence, ‘future acquisition probability’ does not drive the positive abnormal returns of rivals. We then build a conceptual framework that encompasses the impact of merger events on both merging and rival firms in order to provide a schematic to elicit more information on merger type. ZUSAMMENFASSUNG - (Die Wirkung von horizontalen Zusammenschlüssen auf Wettbewerber: Der Nutzen einer Außenseiterposition bei Fusionen) Es ist gemeinhin bekannt, dass Unternehmen nicht Außenseiter einer Fusion zwischen eigenen Wettbewerbern sein wollen. In dieser Arbeit zeigen wir, dass es für Unternehmen durchaus vorteilhaft sein kann, sich an einem großen horizontalen Zusammenschluss nicht zu beteiligen. Anhand einer Datenbank von großen Fusionen, in denen die relevanten Wettbewerber der fusionierenden Unternehmen von Experten der Europäischen Kommission identifiziert worden sind, und Mithilfe einer Ereignisstudienmethode, bestätigen wir empirisch, dass Wettbewerber durchschnittlich positive abnormale Gewinne bei der Ankündigung eines Zusammenschlusses erzielen. Darüber hinaus stellen wir fest, dass die Reaktion der Aktienkurse von Konkurrenten bei der Ankündigung eines Zusammenschlusses nicht anfällig für Fusionswellen ist, und dass die abnormalen Gewinne nicht von der "künftigen Firmenübernahmewahrscheinlichkeit" getrieben sind. Schließlich wird in der Studie ein konzeptioneller Rahmen entwickelt, der die Auswirkungen der Fusion sowohl auf die fusionierenden Unternehmen und als auch auf die Wettbewerber zusammenfasst, um die Art des Zusammenschlusses besser identifizieren zu können.

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  • Joseph A. Clougherty & Tomaso Duso, 2008. "The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger," CIG Working Papers SP II 2008-17r, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2009.
  • Handle: RePEc:wzb:wzebiv:fsiv2008-17r
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    References listed on IDEAS

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    More about this item

    Keywords

    Rivals; Mergers; Acquisitions; Event-Study;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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