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Using Rival Effects to Identify Synergies and Improve Merger Typologies

  • Joseph A. Clougherty
  • Tomaso Duso

The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by efficiency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity. ZUSAMMENFASSUNG - Die Literatur über strategisches Management hatte bisher Schwierigkeiten, zwischen wettbewerbsschädlichen und Effizienz steigenden Synergien bei horizontalen Zusammenschlüssen zu differenzieren. Wir schlagen einen konzeptionellen Rahmen vor, um Fusionen zu klassifizieren, welcher mehr Informationen sowohl über die Fusionstypologie als auch über die Wirkung von Zusammenschlüssen entschlüsselt und welcher eine klare Abgrenzung zwischen wettbewerbsschädlichen und wettbewerbsfreundlichen Fusionen erlaubt. Fundamental für diesen konzeptionellen Rahmen ist, dass er nicht nur die Wirkung der Fusion auf die fusionierenden Unternehmen (was typisch in der Literatur ist) umfasst, sondern auch ihre Wirkung auf die Rentabilität der Wettbewerber. Wir wenden eine Ereignisstudienmethode mit Aktiendaten an, um unsere Kategorisierung empirisch umzusetzen. Im Vergleich einer Stichprobe von Fusionen in der angelsächsischen Welt (US und Großbritannien) mit Fusionen zwischen kontinentaleuropäischen Firmen zeigen wir, wie unsere Methodologie hilfreich sein kann, die Art der Fusionsaktivitäten zu identifizieren.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number SP II 2010-13.

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Length: 49 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:wzb:wzebiv:spii2010_13
Note: Paper only available in English
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  16. FRIDOLFSSON, Sven-Olof & STENNEK, Johan, 1999. "Why mergers reduce profits, and raise share prices: A theory of preemptive mergers," Working Papers 1999018, University of Antwerp, Faculty of Applied Economics.
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