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Announcing mergers or acquisitions generally receive positive combined stock market revaluations.
Member rating: No Rating | Words: | Submitted: Thu Oct 23 2003
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Introduction Firms announcing mergers or acquisitions generally receive positive combined stock market revaluations. Additionally, horizontal mergers elicit larger revaluations than do conglomerate mergers on average. Although it seems likely that the significant average gains to horizontal mergers represent, at least in part, anticipated improvements in production efficiency, empirical evidence to this effect is mixed. It has also been posited that horizontal mergers might allow the merging firms to gain at the expense of other parties including suppliers and/or customers by exercising their increased market power. For example, merging firms may be able to increase their bargaining power over suppliers by pooling their purchasing. Also, merging firms may more easily collude with rival firms to coordinate production rates and prices at the expense of their customers. While these types of gains are not necessarily mutually exclusive of improved production efficiency, they are distinct in that they...
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