Merger Failures

36 Pages Posted: 21 Apr 2011

See all articles by Albert Banal-Estaol

Albert Banal-Estaol

affiliation not provided to SSRN

Jo Seldeslachts

KU Leuven - Faculty of Business and Economics (FEB); German Institute for Economic Research (DIW Berlin)

Date Written: Summer 2011

Abstract

This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post-merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.

Suggested Citation

Banal-Estaol, Albert and Seldeslachts, Jo, Merger Failures (Summer 2011). Journal of Economics & Management Strategy, Vol. 20, Issue 2, pp. 589-624, 2011, Available at SSRN: https://ssrn.com/abstract=1817177 or http://dx.doi.org/10.1111/j.1530-9134.2011.00298.x

Albert Banal-Estaol

affiliation not provided to SSRN

No Address Available

Jo Seldeslachts (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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

Mohrenstraße 58
Berlin, 10117
Germany

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