Buyer Power in Conglomerate Acquisitions

Daniel Greene

Clemson University

Omesh Kini

Georgia State University

Jaideep Shenoy

Tulane University - Department of Finance

July 2014

We examine buyer power as a source of value creation in conglomerate acquisitions. We find that an increase in buyer power is positively related to the combined wealth effect of merging firms and negatively related to both the wealth effect of supplier firms and acquirer rival firms. We document post-acquisition decreases in both output prices for supplier industries and cogs-to-sales for merging firms. Our results cannot be explained by asset complementarities between merging firms, pre-acquisition declining trends in output prices in supplier industries, or negative demand shocks in acquiring firm industries. Overall, our evidence supports buyer power in conglomerate acquisitions.

Number of Pages in PDF File: 73

Keywords: corporate finance, conglomerate acquisitions, buyer power, product market effects

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

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Date posted: April 7, 2013 ; Last revised: January 1, 2015

Suggested Citation

Greene, Daniel and Kini, Omesh and Shenoy, Jaideep, Buyer Power in Conglomerate Acquisitions (July 2014). 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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