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Bargaining Power and Industry Dependence in Mergers

42 Pages Posted: 8 Dec 2008 Last revised: 16 Jun 2012

Kenneth R. Ahern

University of Southern California - Marshall School of Business; National Bureau of Economic Research (NBER)

Date Written: April 17, 2010

Abstract

In contrast to the widely held belief that targets capture the lion’s share of merger gains, I document considerable variation in the division of dollar gains in mergers and find that the gains to targets are only modestly more than the gains to acquirers. I present empirical evidence in support of a new hypothesis that argues that a firm’s relative scarcity (proxied by its market power) and product market dependence (proxied by customer-supplier relations) help to explain the firm’s share of the total merger gains. These results provide some of the first large-scale evidence on bargaining outcomes in mergers.

Keywords: Mergers and acquisitions, bargaining power, product market relationships

JEL Classification: G30, G34, C70

Suggested Citation

Ahern, Kenneth R., Bargaining Power and Industry Dependence in Mergers (April 17, 2010). Journal of Financial Economics (JFE), Vol. 103, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=1311922 or http://dx.doi.org/10.2139/ssrn.1311922

Kenneth Robinson Ahern (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~kahern/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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