Trade Relationships, Indirect Economic Links, and Mergers
73 Pages Posted: 18 Nov 2012 Last revised: 17 May 2017
Date Written: May 16, 2017
The economic links between firms created by customer and supplier relationships are critical determinants of those firms’ values and actions. We demonstrate that significant trade relationships and indirect economic links incrementally explain which firms are more likely to be involved in acquisitions, which pairs of firms are more likely to merge, and which mergers will have the greatest impact, both on value and in motivating follow-on mergers by rivals. Firms with major trade relationships are significantly less likely to acquire, or be acquired, by firms that do not share in those relationships.
Keywords: Mergers & Acquisitions, Product Market, Horizontal, Vertical, Supply Chain, Rivals
JEL Classification: G34, G30, L22
Suggested Citation: Suggested Citation