Merger failures

Albert Banal-Estanol and Jo Seldeslachts

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post-merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.

Keywords: Mergers; Synergies; Asymmetric Information; Complementarities (search for similar items in EconPapers)
JEL-codes: D82 G34 L20 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-com, nep-cta and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Merger Failures (2011)
Working Paper: Merger Failures (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1192

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