The Powerful and Pervasive Effects of Ownership on M&A

42 Pages Posted: 12 Jul 2011

See all articles by John C. Coates, IV

John C. Coates, IV

Harvard Law School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2010


Ownership dispersion is a first-order determinant of M&A practices. Firms with dispersed ownership are more salient, and tend to be larger, but dispersion varies significantly among even large US businesses, and affects M&A deal size, duration, techniques, contract terms, and outcomes. These effects arise directly from the economics of dispersion, but also from interactions between economics and law. Dispersion creates transaction costs and heterogeneous beliefs and preferences that have straightforward effects on M&A deal size, techniques, and some contract terms. But dispersion also has less intuitive, indirect, and important effects as mediated through laws that among other things compensate for agency costs and collective action problems. Each key body of law for M&A – contract law, corporate law, securities law, and antitrust law– is shaped in practice by ownership of target firms. These effects are tested in 20 hypotheses on how ownership dispersion affects M&A, with comprehensive M&A data from the 1990s and 2000s, and a new detailed hand-coded matched sample of 120 recent public and private target M&A contracts. The data show the importance of ownership to M&A deal structure, choice of consideration, bid duration, completion rates, risk-allocation, and dispute resolution. Appreciation of how pervasive and powerful the effects of ownership are on M&A should improve contracting and has implications for investment bankers, boards, courts, and researchers in choosing comparable transactions for valuation, benchmarking, doctrinal analogies, drafting models, teaching M&A in business and law schools, and econometric modeling of M&A.

Keywords: ownership, mergers, acquisitions, law, forum selection, risk-allocation

JEL Classification: D23, D74, G32, G34, G38, K12, K21, K22, K40, K41

Suggested Citation

Coates, John C., The Powerful and Pervasive Effects of Ownership on M&A (June 1, 2010). Available at SSRN: or

John C. Coates (Contact Author)

Harvard Law School ( email )

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels

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