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Bargaining power and industry dependence in mergers

Kenneth Ahern ()

Journal of Financial Economics, 2012, vol. 103, issue 3, 530-550

Abstract: In contrast to the widely held belief that targets capture the lion's share of merger gains, I show that the average dollar gains to targets are only modestly more than the dollar gains to acquirers. To help explain the variation in merger outcomes, I present empirical evidence in support of a new hypothesis that a target's relative scarcity (proxied by its market power) and product market dependence (proxied by customer–supplier relations) help to explain its share of the total merger gains. These results provide new evidence for an unexplored role of product markets on bargaining outcomes in mergers.

Keywords: Mergers and acquisitions; Division of gains; Product market relations; Bargaining (search for similar items in EconPapers)
JEL-codes: G30 G34 C70 (search for similar items in EconPapers)
Date: 2012
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