Incentives for Partial Acquisitions and Real Market Concentration

1 Pages Posted: 5 Mar 2007

See all articles by Patricia Charlety

Patricia Charlety

ESSEC Business School - Finance Department

Marie-Cécile Fagart

University of Rouen and CREST-LEI

Said Souam

University de Tours and CREST-LEI

Date Written: 2007

Abstract

We analyze the incentives of a controlling shareholder of a firm to acquire, directly or indirectly through his firm, shares in a competitor. We charaterize the conditions under which these partial acquisitions are profitable for this dominant shareholder as well as the equilibrium toehold and its nature: controlling or silent. We find that while this shareholder gains, the acquisition is detrimental to minority shareholders of his firm, or of the target, or even of both. We show that the incentives are enhanced if the dominant shareholder initially holds silent stakes in rivals while controlling interests may discourage them. Moreover, we find that partial acquisitions always lead to a decrease in the joint profit of the two firms involved, and an increase in competitors's profits as the market becomes less competitive.

Keywords: horizontal partial acquisitions, real market concentration, dominant shareholder

JEL Classification: D23, D43, G32, G34

Suggested Citation

Charléty-Lepers, Patricia and Fagart, Marie-Cécile and Souam, Said, Incentives for Partial Acquisitions and Real Market Concentration (2007). Available at SSRN: https://ssrn.com/abstract=968239 or http://dx.doi.org/10.2139/ssrn.968239

Patricia Charléty-Lepers (Contact Author)

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Marie-Cécile Fagart

University of Rouen and CREST-LEI ( email )

1, rue Thomas Becket
76821 Mont Saint Aignan Cedex 28 rue des Saints-Peres
Rouen
France
00 331 44 58 27 66 (Phone)

Said Souam

University de Tours and CREST-LEI ( email )

Parc de Grandmont
28 rue des Saints-Peres
F-37200 Tours
France
00 331 44 58 27 46 (Phone)

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