Acquisitions: A curse or blessing for direct competitors? The impact of target ownership structure

Virginie Mataigne, Sophie Manigart and Mathieu Luypaert

Journal of Corporate Finance, 2021, vol. 69, issue C

Abstract: This study examines the impact of horizontal acquisition announcements on the value of direct competitors of the combined entity. We argue that the ownership structure of the target drives competitor wealth effects. First, the stronger disciplining force of the market for corporate control for public firms compared to private firms will lead to higher competitive pressure post-acquisition when a public firm is acquired, leading to more negative valuation effects of direct competitors. Second, acquisitions of subsidiary targets, compared to stand-alone targets, are expected to lead to stronger asset utilization improvements in the target, leading to more negative competitor returns. A unique hand-collected sample of 1038 direct competitors of 228 horizontal acquisitions in Europe empirically supports these hypotheses. Alternative explanations, such as information asymmetry or empire-building, are rejected.

Keywords: Acquisitions; Valuation; Market for corporate control; Ownership structure (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:69:y:2021:i:c:s0929119921001097

DOI: 10.1016/j.jcorpfin.2021.101988

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