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Using Rival Effects to Identify Synergies and Improve Merger Typologies

WZB Discussion Paper SP II No. 2010-13

49 Pages Posted: 30 Oct 2010  

Tomaso Duso

German Institute for Economic Research (DIW Berlin); Duesseldorf Institute for Competition Economics (DICE)

Joseph A. Clougherty

University of Illinois at Urbana-Champaign; Centre for Economic Policy Research (CEPR)

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

Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49 211- 81 10235 (Phone)
+49 211- 81 15499 (Fax)

HOME PAGE: http://sites.google.com/site/tomasoduso/home

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

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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