Using Rival Effects to Identify Synergies and Improve Merger Typologies

WZB Discussion Paper SP II No. 2010-13

49 Pages Posted: 30 Oct 2010

See all articles by Tomaso Duso

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization

Joseph A. Clougherty

University of Illinois at Urbana-Champaign

Date Written: September 28, 2010

Abstract

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 effi-ciency-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.

Keywords: acquisitions, event-study, mergers, research methods, rivals, synergy

Suggested Citation

Duso, Tomaso and Clougherty, Joseph A., Using Rival Effects to Identify Synergies and Improve Merger Typologies (September 28, 2010). WZB Discussion Paper SP II No. 2010-13. Available at SSRN: https://ssrn.com/abstract=1699124 or http://dx.doi.org/10.2139/ssrn.1699124

Tomaso Duso

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization ( email )

Berlin, 10585
Germany

Joseph A. Clougherty (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 S. Sixth Street
350 Wohlers Hall, MC-706
Champaign, IL 61820
United States

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