Mergers and Partial Ownership

Øystein Foros, Hans Jarle Kind and Greg Shaffer
Additional contact information
Greg Shaffer: University of Rochester and University of East Anglia, Postal: University of Rochester and University of East Anglia

No 1/2010, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: In this paper we compare the profitability of a merger to the pro…tability of a partial ownership arrangement and …nd that partial ownership arrangements can be more profiable for the acquiring and acquired firm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firms. In a dual context, we show that a cross-majority owner may have incentives to sell a fraction of the shares in one of the firms he controls to a silent investor who is outside the industry. Aggregate ex post operating profit in the two firms controlled by the cross-majority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better o¤ with than without the partial divestiture.

Keywords: Media economics; Mergers; Corporate Control; Financial Control (search for similar items in EconPapers)
JEL-codes: L13 L22 L82 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-01-21
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Mergers and partial ownership (2011)
Working Paper: Mergers and Partial Ownership (2010)
Working Paper: Mergers and Partial Ownership (2010)
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