HORIZONTAL MERGERS IN A DIFFERENTIATED COURNOT OLIGOPOLY

Using a standard differentiated goods quantity competition setting, we show three facts about horizontal two‐firm mergers that are not true for a homogeneous goods Cournot market. First, merger of two firms is profitable for the merging firms provided that goods are sufficiently distant substitutes. Second, merging of two firms can lead to more two‐firm mergers. Third, an initially non‐profitable two‐firm merger can occur in anticipation of subsequent mergers. These facts imply that mergers are more likely to occur in differentiated goods markets than in homogeneous goods markets.     

CHARACTERIZATION AND ANALYSIS OF COOPERATIVE MERGERS AND THEIR RESULTS

This study characterizes the mergers and acquisitions undertaken in the Spanish agrifood sector during the period 1995–2005. First, it aims to establish the pre‐merger financial characteristics of the merging cooperatives in comparison with other firms in the agrifood sector. For this, the financial situation is analyzed in the different types of merger carried out (merger by formation or merger by acquisition), and the different roles played by the cooperatives (acquiring, acquired or involved in a merger in which a new cooperative is formed). The second and final objective is to determine whether these mergers have managed to improve the economic‐financial situation of the companies involved, either by increasing income and size or by reducing relative costs. For this purpose, several non parametric tests and a probit model were used. The results show that on average following a merger there were no statistically significant improvements in the economic‐financial indicators studied.     

THE IMPACT OF MERGERS IN U.S. PETROLEUM INDUSTRY ON WHOLESALE GASOLINE PRICES

Starting in the mid‐1990s, the U.S. petroleum industry experienced a wave of mergers, several of them between large petroleum companies that were previously competitors. Using an econometric analysis of terminal city‐specific data, this study finds that the majority of the mergers led to higher wholesale gasoline prices in the United States in the mid‐1990s through 2000. (JEL L7, L13, L40)     

Australian Company Mergers 1960-1970*

This study recorded 340 international mergers and 1992 domestic mergers in Australia in the period mid 1959-December 1970. In the 1,460 mergers for which price information was available, the total merger value amounted to $2,283.3 million. The merger movement was most intensive in the later years of the period, with $1,034.8 million being paid for 429 firms during 1968-1970. This compares with some 1,157 mergers transacted at a total cost of $558.4 million recorded by Mr Bushnell [2] in the period 1947-to mid 1959.²³ While mergers took place in almost all industries, they were not uniformly distributed. More than two-thirds of foreign take-overs occurred in manufacturing, compared with less than one-half of domestic mergers in manufacturing. Foreign companies have purchased the largest or leading Australian firms in their respective industries. Moreover, United States take-overs were important in basic chemicals and flour mill and cereal products; on the other hand, United Kingdom take-overs were prominent in beverages and malt, other industrial machinery and fabricated metal products. Among the foreign acquiring companies, merger activity was more concentrated in United Kingdom-based companies than among United States-based companies. For the period as a whole, domestic take-overs outnumbered foreign take-overs by more than 5·5 to 1. In examining the limited evidence for foreign take-over activity in the period 1946-59,²⁴ it is apparent that foreign firms have accounted for a much higher share of merger activity during the nineteen-sixties. In addition, mergers overseas have brought together the Australian subsidiaries of the merging companies. Mr Bushnell [2] rated the tax structure including all its ramifications as probably the single most important cause for mergers.²⁵ While tax factors have continued to play an important role in merger activity, it appears that, during the sixties, a far more important reason for mergers in many industries has been the so-called proliferation effect of mergers. As some firms, especially the multinationals, took over leading local companies making for cost and competitive advantages, invariably the smaller remaining independent firms were compelled to resort to mergers for defensive reasons. The owners of many of these firms, fearing a war of attrition, took advantage of avoiding risks by capitalizing future profits in the form of tax-free capital gains, by selling out before a situation emerged where their bargaining power would have been seriously eroded. Most of these firms disappearing into mergers, did so with partners closely related to their existing operations. Approximately three-fourths of domestic and foreign take-overs were of the broad horizontal class.     

BANK MERGERS AND ACQUISITIONS – AN EVALUATION OF THE ‘FOUR PILLARS’ POLICY IN AUSTRALIA*

This paper examines the efficiency consequences of bank mergers and acquisitions with particular reference to the ‘four pillars’ policy preventing mergers among the four major banks. Using data envelopment analysis, the technical efficiencies of banks operating in Australia over the period from 1983 to 2001 are estimated. A second‐stage regression is used to evaluate ex‐post efficiency performance of banks involved in mergers and acquisitions. The empirical results demonstrate that for the time being mergers among the four major banks may result in much poorer efficiency performance in the merging banks and the banking sector.     

The Impact of the European Emission Trading Scheme on Multiple Measures of Economic Performance

The European Emission Trading Scheme (EU ETS) has introduced a price for carbon, thus generating an additional cost for companies that are regulated by the scheme. The objective of this paper is to provide empirical evidence on the effect of the EU ETS on firm-level economic performance. There is a growing body of empirical literature that investigates the effects of the EU ETS on firm economic performance, with mixed results. Differently from the previous literature, we test the effect of the EU ETS on a larger set of indicators of economic performance: employment, average wages, turnover, value added, markup, investment, labour productivity, total factor productivity and ROI. Our results, based on a large panel of European firms, provide a broad picture of the economic impact of the EU ETS in its first and second phases of implementation. Contrarily to the expectations, the EU ETS did not affect economic performance negatively. Results suggest that firms have reacted to the EU ETS by passing-through costs to their customers on the one hand and improving labour productivity on the other hand.     

MERGERS AND PRODUCT QUALITY: A SILVER LINING FROM DE‐HUBBING IN THE U.S. AIRLINE INDUSTRY

This paper investigates how de‐hubbing, which occurs when an airline ceases hub operations, impacts product quality. Examining four cases of de‐hubbing following U.S. airline mergers between 1998 and 2016, we analyze three product quality measures: on‐time performance, travel time, and flight cancellations. In order to isolate a merger's impact on product quality, we compare the results of four de‐hubbing events that followed a merger with three de‐hubbing cases that occurred independently of a merger. We find a silver lining from mergers because product quality improvements are isolated to de‐hubbing events which follow airline mergers rather than nonmerger‐induced de‐hubbing. (JEL L15, L93)     

ON THE PRICE EFFECTS OF HORIZONTAL MERGERS: A THEORETICAL INTERPRETATION

Horizontal mergers are usually under the scrutiny of antitrust authorities due to their potential undesirable effects on prices and consumer surplus. Ex‐post evidence, however, suggests that these effects do not always take place and even relevant mergers may end up having negligible price effects. The analysis of mergers in the context of non‐localized spatial competition may offer a further interpretation to the ones proposed in the literature: in this framework both positive and zero price effects are possible outcomes of the merger activity.     

PRICE AND WELFARE EFFECTS OF OLIGOPOUSTIC MERGERS

When oligopolists merge, the new firm enjoys a lower cost structure than any of its premerger constituent parts. This is because of rationalization economies which are created as facilities previously operated at disparate marginal cost levels come under common control. The resultant price-decreasing force is countered by the loss of competition due to the merger. The latter can stem not only from reduction in the number of competitors, but also from the possibility that, with a more concentrated market structure, firms'conjectures about each others'reactions will move in the direction of being more cooperative. The paper shows that, under normal conditions, the effects of diminished competition outweigh those of rationalization so that a price increase will result from the merger. In addition, the equivalence of merger to the imposition of taxes is exploited to derive a market-share based test for mergers to cause welfare decreases. This complements a test proposed by Farrell and Shapiro that works only for welfare increases.     

Evaluating Mergers in the Australian Petroleum Industry

We study the effects of mergers in the Australian petroleum industry during 1980–1994. The effect on the profitability of both the merging and non–merging firms is estimated. There is robust evidence that mergers have been associated with a decrease in profitability for all firms. Thus, the results are not consistent with the view that mergers have acted primarily to increase market power or that they have acted primarily to increase efficiency. There is some support for the more complicated view that mergers have both increased market power and decreased efficiency, with the latter effect dominating.     

NEW ZEALAND CREDIT UNION MERGERS

ABSTRACT ** : Research into the benefits of mergers in small financial institutions, in particular credit unions, is sparse. This study helps to fill this gap by analyzing recent intense merger activity in New Zealand credit unions. The major driver for these mergers was not the usual reason of attempting to increase efficiency for competitive purposes but rather enforced government action. Data envelopment analysis is used to explore changes in efficiency in merged credit unions between 1996 and 2001. Those credit unions not involved in merger activity are used as a control group. Overall, credit unions have become more efficient over the period, notably in those that undertook mergers. The Malmquist index indicates significant technological progress over the period but a slight regression in terms of efficiency.     

An Assessment of Bank Merger Success in Germany

Abstract. German banks have experienced a merger wave since the early 1990s. However, the success of bank mergers remains a continuous matter of debate.This paper suggests a taxonomy to evaluate post-merger performance on the basis of cost and profit efficiency (CE and PE). I identify successful mergers as those that fulfill simultaneously two criteria. First, merged institutes must exhibit efficiency levels above the average of non-merging banks. Second, banks must exhibit efficiency changes between merger and evaluation year above efficiency changes of non-merging banks. I assess the post-merger performance up to 11 years after the mergers and relate it to the transfer of skills, the adequacy to merge distressed banks and the role of geographical distance. Roughly every second merger is a success in terms of either CE or PE. The margin of success in terms of CE is narrow, as efficiency differentials between merging and non-merging banks are around 1 and 2 percentage points. PE performance is slightly larger. More importantly, mergers boost in particular the change in PE, thus indicating persistent improvements of merging banks to improve the ability to generate profits.     

Life Science Innovation and the Restructuring of the Pharmaceutical Industry: Merger, Acquisition and Strategic Alliance Behaviour of Large Firms

This article explores the transformative nature of the life sciences in the context of pharmaceutical mergers, acquisitions and strategic alliances. Drawing on interviews with senior scientists and managers from large pharmaceutical firms, and secondary data on general industry trends, it identifies diverse company strategies for capturing and exploiting new technologies/knowledge and explores their implications for innovation. The article suggests that mergers, acquisitions and strategic alliances represent a cluster of related activities that provide various strategic options for managing innovation and productivity deficit. However, because the preferred balance between in-house R&D and externally sourced knowledge depends on a number of firm-specific factors, as well as challenges posed by the external operating environment, there is increasing variation between large companies in how these activities are exploited and strategically managed.     

Multidivisional firms, internal competition, and the merger paradox

Abstract.  Traditional modelling of mergers has the merged firms (insiders) cooperate and maximize joint profits. This approach has several unappealing results in quantity‐setting games, for example, mergers typically are not profitable for insiders, but are profitable for non‐merging firms (outsiders). We take a different approach and allow for a parent company that can play each insider off one another. In quantity‐setting games, with our approach mergers are profitable for insiders, unprofitable for outsiders, socially beneficial, and involve (in a non‐monopolizing merger) a small number of firms. Finally, we find that the optimal strategy depends on whether firms compete in quantity or prices. JEL classification: L000     

Merger Waves and Firm Growth: Contemporary Historical Evidence

This article presents the outcomes of an evaluation of the impact of the series of mergers of the local exchange companies that have taken place between 1988 and 2001 on an important measure of performance of the firms undergoing the mergers. The analysis reveals that after firms have undertaken one merger they experience little or no growth after such mergers, but the impact of second mergers on firm growth have been negative. If an important motive in undertaking mergers has been to enhance firm growth, then the merger waves that have been approved and consummated have led to performance declines. The impacts of the merger wave on the growth of the telecommunications sector firms have been negative.     

TAXING FOREIGN PROFITS WITH INTERNATIONAL MERGERS AND ACQUISITIONS*

A large part of border crossing investment takes the form of international mergers and acquisitions. In this article, we ask how optimal repatriation tax systems look like in a world where investment involves a change of ownership, instead of a reallocation of real capital. We find that the standard results of international taxation do not carry over to the case of international mergers and acquisitions. The deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure global optimality. The tax exemption system is optimal if ownership advantage is a public good within the multinational firm. However, the cross‐border cash‐flow tax system dominates the exemption system in terms of optimality properties.     

掏空、支持与并购重组--来自我国上市公司的经验证据

本文选取我国资本市场 1 998— 2 0 0 1年间发生的 41 6起上市公司收购兼并非上市公司事件为研究样本 ,实证考察了控股股东和地方政府的支持或掏空动机对上市公司长期绩效的影响。结果表明 ,当公司具有配股或避亏动机时进行的购并活动能够在短期内显著提升公司的会计业绩 ,而无保资格之忧时进行的并购活动目的在于掏空资产 ,会损害公司的价值 ,但掏空行为对公司的会计业绩却没有显著影响。     

Portfolio effects in conglomerate mergers: the empirical evidence of leverage effects in Korean liquor market

In the article, we implement an empirical test on the portfolio effects of conglomerate mergers, using the data of Korean liquor market during the period 1990–2008 in which there have been several important conglomerate mergers between beer and soju companies. We find that the combined company could take the advantage of regional market dominance in the beer market in expanding regional market shares in the soju market. Such leverage effects are differentiated from the efficiency-enhancing portfolio effects that result in the combined company’s expanding shares over all regional soju markets regardless of the presence of dominance in the beer market. The common distribution channels of liquor wholesalers seem to play a pivotal role in the combined firm’s expansion of dominance in one market into another. Furthermore, we implement separate empirical tests for two subsamples of regionally dominant and nondominant soju companies in order to differentiate the leverage effects of foreclosure from those of toehold. The empirical results show the evidence of leverage effects only for a sample of nondominant soju companies. This implies that the leverage effects of conglomerate mergers between beer and soju companies in Korea had pro-competitive effects in that the combined firm could compete more effectively with regionally dominant companies with the leverage of dominance in the beer market as toehold.     

THE WELFARE EFFECTS OF UPSTREAM MERGERS IN THE PRESENCE OF DOWNSTREAM ENTRY BARRIERS*

We examine the incentives for upstream firms to consolidate horizontally and the impact of this process on industry performance, when there are downstream entry barriers and firms negotiate bilaterally. In the short run, consumers are not worse off with upstream mergers, since consolidation only results in a redistribution of industry rents. In the long run, consumers are better off after upstream mergers, since they induce more entry into that segment. When social welfare is evaluated, a limit on upstream consolidation may prevent excessive entry; but upstream entry can be sometimes insufficient, if the retailers' intrinsic bargaining power is excessive.     

国外并购绩效评价方法研究综述

20世纪全球经历了5次企业并购浪潮,并购已经成为现代企业尤其是大型企业和高成长企业快速扩张和整合的重要手段之一.企业并购的之后的效果如何,如何来评价并购的绩效,国外学者从不同角度做了大量的研究,但数十年的研究至今没有一个统一的结论.本文总结了30多年以来国外学者有关企业并购绩效研究的重要文献,在此基础上将国外并购绩效的评价方法分为财务评价、股票评价和其他评价三类,并指出了并购绩效评价方法中存在的问题.