Mergers and acquisitions
Subtitle: an experimental analysis of synergies, externalities and dynamics
By: Rachel T.A. Croson, Armando R. Gomes, Kathleen L. McGinn, Markus Nöth
Contributors: Harvard Business School. Division of Research; Gomes, Armando R.; McGinn, Kathleen L.; Noth, Markus
Series: Working paper / Division of Research, Harvard Business School -- 02-101; Working paper (Harvard Business School. Division of Research) -- 02-101
Publisher: Division of Research, Harvard Business School
Published: 2002
Place of publication: Boston]
Language: eng
Number of pages: 36
Description: It has been argued that the mergers and acquisitions observed in the 1990s improved market efficiency by capturing synergies between the firms. However, mergers between firms also impose externalities (both positive and negative) on the remaining industry. This paper describes a new equilibrium concept designed to explain and predict bargaining in this setting. We experimentally compare the predictive power of the new equilibrium concept in situations without and with externalities to that of competing concepts. We also examine other predictions of the new concept including the dynamics of mergers and outcome implications of those dynamics. Our experimental results support the predictions of the equilibrium concept and provide an organizing explanation for previously observed inconsistent results in event studies.
Notes: Includes bibliographical references.