Eat or be eaten
Subtitle: a theory of mergers and merger waves
By: Gary Gorton, Matthias Kahl, Richard Rosen.
Contributors: Kahl, Matthias.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11364; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11364.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Consolidation and merger of corporations.
Description: "In this paper, we present a model of defensive mergers and merger waves.  We argue that mergers and merger waves can occur when managers prefer that their firms remain independent rather than be acquired.  We assume that managers can reduce their chance of being acquired by acquiring another firm and hence increasing the size of their own firm.  We show that if managers value private benefits of control sufficiently, they may engage in unprofitable defensive acquisitions.  A technological or regulatory change that makes acquisitions profitable in some future states of the world can induce a preemptive wave of unprofitable, defensive acquisitions.  The timing of mergers, the identity of acquirers and targets, and the profitability of acquisitions depend on the size of the private benefits of control, managerial equity ownership, the likelihood of a regime shift that makes some mergers profitable, and the distribution of firm sizes within an industry"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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