Quantifying the Coordinated Effects of Partial Horizontal Acquisitions

Abstract

Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive e¤ects of partial acquisitions. We propose an empirical structural methodology to quantify the coordinated e¤ects of such acquisitions on di¤erentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. The methodology can deal with settings involving all type of owners and ownership rights: owners that can be internal to the industry (rival …rms) and external to the industry; and ownership rights that can involve …nancial interests and corporate control, can be direct and indirect, can be partial or full. We provide an empirical application of our proposed methodology to several acquisitions in the wet shaving industry that give rise to cross-and common-ownership structures. The results seem to suggest that the incentives of (i) the acquiring party's …rm to coordinate are non-decreasing after an acquisition (independently of whether it involves full or partial …nancial or corporate control rights, by internal or external owners), (ii) the acquired …rm to coordinate are non-decreasing after acquisitions involving full or partial corporate control rights, but non-increasing after acquisitions involving full or partial …nancial rights, and (iii) the remaining …rms in the industry to coordinate are non-increasing after an acquisition (again, independently of whether it involves full or partial …nancial or corporate control rights, by internal or external owners).

Assessment of post-merger coordinated effects: Characterization by simulations

“…A C C E P T E D M A N U S C R I P T 6 Consistent with our results, both Davis and Huse (2010) and Brito et al (2013) find that the effect on insiders is considerably stronger than on outsiders. 10 Note that our results are indeed consistent with the findings of previous empirical papers.…”

“…(See row 2 in Table 1.) 33 These results are in line with what has been found by Brito et al (2013). Indeed, the results of their counterfactuals merger simulations applied to the wet-shaving industry in the U.S. suggest that both post-merger Nash and deviation prices are higher after the merger.…”

“…Their results show that the CRDF of insiders would decrease after a merger, while the CRDF of outsiders would increase. Similarly, Brito et al (2013) simulate the coordinated effects of mergers and partial horizontal acquisitions in the wet shaving industry. The study finds that both partial and full acquisitions generate a decrease in the CRDF of acquiring firms while increasing the CRDFs of the remaining firms in the market.…”

Acquisitions Entry Strategies in Africa: The Role of Institutions, Target-Specific Experience, and Host-Country Capabilities-The Case Acquisitions of Finnish Multinationals in Africa

“…Regulatory formal institutions can restrict foreign investors in certain key industries. They can also restrict the share of equity held by foreign bidders as a whole or in certain key industrial sectors (Moskalev, ), or impose restriction to avoid infringement on industry competition (Brito, Ribeiro, & Vasconcelos, ). Regulatory restrictions can also create the existence of shares without voting rights, and share ownership by parties who are reluctant to sell their shares (Slangen & ­Hennart, 2007).…”