When is it rational for firms to acquire silent interests in rivals?

Flath, David

doi:10.1016/0167-7187(91)90066-t

Cited by 75 publications

(70 citation statements)

References 5 publications

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“…Such a target value decreasing acquisition implies the payment of a premium to the selling shareholder whereas minority shareholders of the target lose. 30 On the contrary, the acquisition of a relatively high share in a rival will lead the acquiring shareholder to close his own company at the expense of its minority shareholders and to the benefit of the target.…”

Section: Resultsmentioning

confidence: 99%

“…31 Another interesting result concerns the choice between a direct acquisition of shares and an indirect acquisition through the controlled company (a stock "pyramid", see Faccio and Lang, 2000). 30 Such cases are often documented in the economic press. For example, in 2002, the spanish group Bami offered a high premium (60%) to Banco Bilbao Viscaya Argentaria (BBVA) for the controlling block of 23,9%…”

Section: Resultsmentioning

confidence: 99%

“…Bresnahan and Salop (1986), and Reynolds and Snapp (1986) have shown this result in the case of joint-ventures. Flath (1991) shows that a non controlling partial ownership of a firm in another one has typically two effects: a direct effect which induces the acquirer to sacrifice some of its own revenue in order to see its stake in the other firm better valued; the second effect is a strategic one and is due to the rival's response to this toehold. The direct effect is always negative while the second one depends on the type of competition.…”

Section: Introductionmentioning

confidence: 99%

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Incentives for Partial Acquisitions and Real Market Concentration

Charléty¹,

Fagart²,

Souam³

2009

JITE

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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.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Incentives for Partial Acquisitions and Real Market Concentration

Charléty¹,

Fagart²,

Souam³

2009

JITE

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“…If indirect shareholding (Flath 1991(Flath , 1992) is assumed, then the payoff of firm k has the form…”

Section: The General Mathematical Modelmentioning

confidence: 99%

“…While Berglof and Perotti (1994) and Arikawa and Kato (2004) consider cross shareholding effect in terms of corporate governance, Flath (1991Flath ( , 1992 and Merlone (2001) proved some results in terms of cartelizing effects. Different profit formulations are considered when studying the collusive effects of cross-shareholding, see for instance Reynolds and Snapp (1986) and Flath (1992).…”

Section: Introductionmentioning

confidence: 99%

Dynamic oligopoly with partial cooperation and antitrust threshold

Matsumoto

Merlone

Szidarovszky

2010

Journal of Economic Behavior & Organization

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A general framework of partial cooperation and shareholding interlocks in oligopolies is first introduced, and then the best responses of the firms are determined. The monotonic dependence of the equilibrium industry output on the cooperation levels of the firms is proved. Conditions are given for the local asymptotic stability of the equilibrium which require sufficiently small speed of adjustments. Antitrust thresholds are then introduced into the model which may result in the loss of equilibrium or in the presence of multiple equilibria. The dynamic behavior of the associated dynamic models with adaptive output adjustments also becomes more complex: period-2 cycles may emerge and coexist with stationary states.JEL code: C71

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Cartelizing effects of horizontal shareholding interlocks

Merlone

2001

Manage Decis Econ

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Some models of industries with horizontal shareholding interlocks are generalized. First, we consider industries where firms exhibit different technologies and more general market demand functions. The cartelizing effects of financial interlocks are examined using both the Lerner index and the Herfindahl-Hirshman index. Furthermore, the model is extended to consider multiproduct oligopolies. We find a compact expression for the Lerner index and study the cartelizing effects of such an industry. Copyright © 2001 John Wiley & Sons, Ltd.

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When is it rational for firms to acquire silent interests in rivals?

Cited by 75 publications

References 5 publications

Incentives for Partial Acquisitions and Real Market Concentration

Incentives for Partial Acquisitions and Real Market Concentration

Dynamic oligopoly with partial cooperation and antitrust threshold

Cartelizing effects of horizontal shareholding interlocks

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