The role of divestitures in horizontal mergers11We thank Jon Garfinkel, Jayant Kale, Kai Li, Gordon Philips, Anand Vijh, Thomas Wollmann, David Ravenscraft and participants at the 2016 American Finance Association Meetings, Mitsui Finance Symposium 2016, University of Iowa seminar for helpful comments, and an anonymous referee for helpful comments. All errors are our own

Mosab Hammoudeh, Amrita Nain and Yiming Qian

Journal of Corporate Finance, 2022, vol. 72, issue C

Abstract: We study the effectiveness of divestitures as a merger remedy. We show that divestitures are more effective in mitigating the market power impact of mergers if the merging firms divest assets to buyers outside the industry rather than existing rivals. Divestitures are also more effective as merger remedies when the merging industry is concentrated and when powerful customers are absent. Notably, stock price reactions of the acquirer and rivals suggest that firms are more concerned with maintaining a competitive edge relative to each other than gaining market power relative to customers.

Keywords: Mergers; Acquisitions; Market power; Antitrust; divestitures (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:72:y:2022:i:c:s0929119921002546

DOI: 10.1016/j.jcorpfin.2021.102132

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