The Stock Market's Valuation of Research and Development and Market Concentration in Horizontal Mergers

Ralph Sonenshine

Working Papers from American University, Department of Economics

Abstract: It is well documented that acquirers often pay a very large premium to acquire companies in related industries. There are many explanations as to the source of this premium. This study isolates two variables, R and D-intensity and market concentration, and correlates their value individually and jointly to the value of the acquired company. The results indicate that change in market concentration and Research and Development is positively correlated to the merger deal premium in a horizontal merger. Furthermore, deal premiums tend to follow an inverted U curve pattern relative to market concentration change. The study also shows that cost synergies and macro economic growth impact deal premium values.

Keywords: mergers; Research and Development; market concentration; deal premium (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-com, nep-ind and nep-ino
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https://doi.org/10.17606/cz7r-kh47 First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:amu:wpaper:2009-12

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