Abstract

http://ssrn.com/abstract=2245728
 


 



Buyer Power in Conglomerate Acquisitions


Daniel Greene


Clemson University

Omesh Kini


Georgia State University

Jaideep Shenoy


Tulane University - Department of Finance

July 2015


Abstract:     
We examine the sources of value creation in conglomerate acquisitions. Consistent with a buyer power explanation, our proxies for the merging firms’ change in purchasing concentration are positively related to the combined wealth effect of merging firms, negatively related to the change in cogs-to-sales of merging firms, and negatively related to the wealth effects of common supplier industry firms and rival firms. Furthermore, we document post-acquisition decreases in output prices for the main common supplier industry. We find that greater asset complementarities and increased debt capacity also generate larger gains for merging firms. Finally, agency considerations drive some conglomerate acquisitions.

Number of Pages in PDF File: 77

Keywords: corporate finance, conglomerate acquisitions, buyer power, product market effects, asset complementarities, financial synergies

JEL Classification: G34, L11, L22, L25, D57


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Date posted: April 7, 2013 ; Last revised: July 15, 2015

Suggested Citation

Greene, Daniel and Kini, Omesh and Shenoy, Jaideep, Buyer Power in Conglomerate Acquisitions (July 2015). Available at SSRN: http://ssrn.com/abstract=2245728 or http://dx.doi.org/10.2139/ssrn.2245728

Contact Information

Daniel Greene
Clemson University ( email )
101 Sikes Ave
Clemson, SC 29634
United States
Omesh Kini
Georgia State University ( email )
University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)
Jaideep Shenoy (Contact Author)
Tulane University - Department of Finance ( email )
7 McAlister Drive
A.B. Freeman School of Business
New Orleans, LA 70118
United States
504-865-5045 (Phone)
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