Mergers in the Digital Economy

Axel Gautier and Joe Lamesch
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Axel Gautier: Université catholique de Louvain, LIDAM/CORE, Belgium

No 3136, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Over the period 2015–2017, the five giant technologically leading firms, Google, Amazon, Facebook, Apple and Microsoft (GAFAM) acquired 175 companies, from small startups to billion dollar deals. In this paper, we provide detailed information and statistics on the merger activity of the GAFAM and on the characteristics of the firms they acquire. One of the most intriguing features of these acquisitions is that, in the majority of cases, the product of the target is discontinued under its original brand name post acquisition and this is especially true for the youngest firms. There are three reasons to discontinue a product post acquisition: the product is not as successful as expected, the acquisition was not motivated by the product itself but by the target’s assets or R&D effort, or by the elimination of a potential competitive threat. While our data does not enable us to screen between these explanations, the present analysis shows that most of the startups are killed in their infancy. This important phenomenon calls for tighter intervention by competition authorities in merger cases involving big techs.

Keywords: Mergers; GAFAM; platform; digital markets; competition policy; killer acquisition (search for similar items in EconPapers)
JEL-codes: D43 G34 K21 L40 L86 (search for similar items in EconPapers)
Date: 2020-12-31
Note: In: Information Economics and Policy, 2021, vol. 54, 100890
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvrp:3136

DOI: 10.1016/j.infoecopol.2020.100890

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