Potential Sources of Value from Mergers and Their Indicators

33 Pages Posted: 30 Apr 2018

See all articles by Melissa A. Schilling

Melissa A. Schilling

New York University (NYU) - Department of Management and Organizational Behavior

Date Written: February 25, 2018

Abstract

Firms engage in mergers for many reasons, some of which create value for both the firm’s shareholders and society, some that create value only for the firm’s shareholders, and some that fail even to do that. A considerable body of research concludes that most mergers do not create value for anyone, except perhaps the investment bankers that negotiated the deal. For a merger to create value, it will usually be necessary that one or both parties is below minimum efficient scale or has valuable underutilized assets. Furthermore, unless heavy coordination and long-term commitment are required, many sources of value from mergers can be achieved through collaboration agreements or other contracts, with less risk to the firms and to economic efficiency. This article outlines the major sources of potential value in mergers, and indicators that can give us insight into a merger’s true motives and its likelihood of creating value.

Keywords: mergers, acquisitions, shareholder value, economies of scale, complementation, ecosystems

JEL Classification: L11, L12, L16, L24, L25, L41, L93, M20

Suggested Citation

Schilling, Melissa A., Potential Sources of Value from Mergers and Their Indicators (February 25, 2018). Antitrust Bulletin, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3168473 or http://dx.doi.org/10.2139/ssrn.3168473

Melissa A. Schilling (Contact Author)

New York University (NYU) - Department of Management and Organizational Behavior ( email )

40 West Fourth Street
New York, NY 10012
United States
212-998-0249 (Phone)
212-995-4235 (Fax)

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