Download This PaperKiller Acquisitions: Evidence from EC Merger Cases in Digital Industries
forthcoming in Antitrust Law Journal - TSE Working Paper No. 13-1420
56 Pages Posted: 17 Apr 2023 Last revised: 30 Jan 2024
Date Written: March 27, 2023
Abstract
Do established firms buy new businesses to take out future competition? Recent works in economics literature use “killer acquisitions” as a graphic concept to describe these transactions. How concerned should competition policy be? The answer to this question hinges on how much the “theory” of killer acquisitions explains. To gain insights on this, the paper studies a sample of past cases composed of all merger transactions reviewed by the European Commission (“EC”) in ICT industries. In line with the predictions of the theory, some of these cases might constitute “killer acquisitions”. Hence, the paper asks: did they lead to a reduction of competition? By focusing on perceptions of the competitors of the acquired entity as reported in financial disclosures, the paper shows that one could not observe a disappearance of the target’s products, a weakening of competing firms, and/or a post-merger lowering or absence of entry and innovation. In other words, the paper finds no factual evidence supporting the killer acquisition theory. Whilst based on small number of observations, the paper’s findings are strong. Indeed, the paper’s methodology overcomes the inherent challenge to observe the post-merger activities of the target, and addresses the inference problem that stems from the fact that even if the target’s products are discontinued in the buyer’s firm, it is non sequitur to infer from this a post-merger weakening of competition.
Keywords: Killer Acquisition, Dynamic Competition, Mergers and Acquisitions, Innovation
JEL Classification: G34, L41, L86, O31
Suggested Citation: Suggested Citation
0 References
0 Citations
Do you have a job opening that you would like to promote on SSRN?
- Citations
- Policy Citations: 2
- Citation Indexes: 1
- Usage
- Abstract Views: 4952
- Downloads: 1672
- Captures
- Readers: 21
- Citations
- Policy Citations: 2
- Citation Indexes: 1
- Usage
- Abstract Views: 4952
- Downloads: 1672
- Captures
- Readers: 21