ADDING DIMENSION TO MERGER ANALYSIS

Traditional merger analysis in the U.S. focuses on a single dimension: namely, the combination of two or more firms that supply substitutable products. Thus, merger analysis misses the fact that there are various types of mergers—for example, hostile takeovers, friendly acquisitions, and mergers of equals—and that the differences among these types affect outcomes. Similarly absent is explicit consideration of merger-created synergies for future markets. We illustrate the effects of painting all mergers with the same brush on the propensity for firms to form beneficial mergers and we suggest...

Traditional merger analysis in the U.S. focuses on a single dimension: namely, the combination of two or more firms that supply substitutable products. Thus, merger analysis misses the fact that there are various types of mergers—for example, hostile takeovers, friendly acquisitions, and mergers of equals—and that the differences among these types affect outcomes. Similarly absent is explicit consideration of merger-created synergies for future markets. We illustrate the effects of painting all mergers with the same brush on the propensity for firms to form beneficial mergers and we suggest means of changing merger analysis to reflect diversity in the natures of mergers and their future markets.