Threatening to Buy: Private Equity Buyouts and Antitrust Policy

10 Pages Posted: 20 Dec 2017

See all articles by Pehr-Johan Norbäck

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Joacim Tåg

Research Institute of Industrial Economics (IFN)

Date Written: December 18, 2017

Abstract

Private equity firms (PE firms) have become common owners of established firms in concentrated markets. We show that the threat of a PE acquisition can trigger incumbent mergers in an otherwise merger-stable industry. This can help antitrust authorities maximize consumer surplus because previously privately unprofitable — but consumer surplus-enhancing — mergers now take place. We thus predict that merger waves among incumbents should follow the development of a local PE industry.

Keywords: Antitrust Policy, M&As, Private Equity, Temporary Ownership

JEL Classification: G32, G34, L13, L22, L40

Suggested Citation

Norbäck, Pehr-Johan and Persson, Lars and Tåg, Joacim, Threatening to Buy: Private Equity Buyouts and Antitrust Policy (December 18, 2017). Economics Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3089957

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Joacim Tåg (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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