What drives merger outcomes?

Jurich, Stephen N.; Walker, M. Mark

doi:10.1016/j.najef.2018.08.003

Cited by 10 publications

(3 citation statements)

References 36 publications

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“…Alexandridis et al (2017) analyzed how mega M&As perform differently from non-mega deals. Jurich and Walker (2019) find that acquiring firms' gains are positively (negatively) affected by the acquiring (target) firm's size. Hu et al (2020) show that an acquirer's previous acquisition experience positively affects both short-and long-term abnormal stock returns.…”

Section: Introductionmentioning

confidence: 85%

An investigation of market reaction differences between mega-deals and non–mega deals considering industry concentration

Gao

Bao

2023

Finance Research Letters

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Section: Introductionmentioning

confidence: 85%

An investigation of market reaction differences between mega-deals and non–mega deals considering industry concentration

Gao

Bao

2023

Finance Research Letters

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“…They study 29 vertical mergers and find an even mix between welfare-enhancing transactions and mergers that harm consumers and competitors. Jurich and Walker (2019) add another rationale for the gains from vertical mergers in their contention that acquirer gains are correlated to the size of the acquiring firm and negatively related to the size of the target firm. Williamson (1985) and Perry (1989) add that vertical integration may lead to efficient investments when firms need to invest in assets that are specialized and market exchanges are difficult.…”

Section: Welfare Impacts Of Vertical Mergersmentioning

confidence: 99%

The Impact of Vertical Theories of Harm on Investor Returns: An Event Study of US Vertical Mergers

Sonenshine

2022

JRFM

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The welfare implications of vertical mergers have been a subject of disagreement for decades. Similar to horizontal mergers, economists need to weigh the efficiency gains relative to the market power concerns when considering the competitive effects of vertical mergers. However, in vertical mergers, regulators are also concerned with other potential harmful effects, such as input and customer foreclosure. Using an event style technique, this paper explores these vertical theories of harm by comparing the abnormal returns of acquirers, targets, and the two combined in vertical and horizontal mergers that were challenged by regulators as potentially anticompetitive. Our results indicate that abnormal returns to targets were similar between vertical and horizontal mergers, but the gains to targets relative to acquirers were far higher in vertical versus horizontal mergers (53.6% versus 39.5%). In addition, we found that exclusionary effects have a positive impact (0.24% of the dollar abnormal return) on the bargaining position of targets. In contrast, acquirers gain 0.45% and 0.39% of the dollar abnormal return relative to targets when the antitrust concern entails collusive effects or elimination of potential competition, respectively.

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“…Following Ahern (2012) and Jurich and Walker (2019), we calculate the combined gain or loss for each merger by examining the change in acquiring-and target-firm shareholder wealth around the announcement date. We then calculate the distribution of the gain between the acquiring-and target-firm shareholders.…”

Section: Wealth Creation and Distributionmentioning

confidence: 99%

Deal motivations and bargaining power: do executives show their hand in SEC filings?

Jurich

Walker

2021

SN Bus Econ

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Our study tests the bargaining power hypothesis by examining how the operating, marketing, and financial deal motivations cited by the merging-firm managers in company filings with the Securities and Exchange Commission affect their relative bargaining power in value-increasing mergers. We find that acquiring-firm shareholders capture an average of 40.1% of the total shareholder gain. Further analysis shows that acquiring-firm managers gain bargaining power when the target-firm executives cite the acquirer's technological expertise as a reason for the merger, whereas acquiring-firm managers lose bargaining power when the acquirers cite the target's technological expertise. Acquirers also lose bargaining power when the target managers cite the acquirer's manufacturing/resource capacity as a motivation. These results support the role that strategic fit and industry factors play in driving the managers' relative bargaining position. Finally, our finding that acquiring-firm managers gain bargaining power when the targets cite access to capital or expanding the customer base as a deal motivation sheds light on why firm size is an important determinant of bargaining power. Our study contributes to the literature by providing evidence that acquiring-firm managers often have more bargaining power than previously thought based on empirical studies that analyze the cumulative abnormal returns earned by target-and acquiring-firm shareholders at the merger announcement date.

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What drives merger outcomes?

Cited by 10 publications

References 36 publications

An investigation of market reaction differences between mega-deals and non–mega deals considering industry concentration

An investigation of market reaction differences between mega-deals and non–mega deals considering industry concentration

The Impact of Vertical Theories of Harm on Investor Returns: An Event Study of US Vertical Mergers

Deal motivations and bargaining power: do executives show their hand in SEC filings?

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