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Acquisitions: a curse or blessing for direct competitors? The impact of target ownership structure
Mataigne, Virginie Luypaert, Mathieu Manigart, Sophie
Mataigne, Virginie
Luypaert, Mathieu
Manigart, Sophie
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2021
Journal
Journal of Corporate Finance
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Publication Volume
69
Publication Issue
August
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Abstract
This study examines the impact of horizontal acquisition announcements on the value of direct competitors of the combined entity. We argue that the ownership structure of the target drives competitor wealth effects. First, the stronger disciplining force of the market for corporate control for public firms compared to private firms will lead to higher competitive pressure post-acquisition when a public firm is acquired, leading to more negative valuation effects of direct competitors. Second, acquisitions of subsidiary targets, compared to stand-alone targets, are expected to lead to stronger asset utilization improvements in the target, leading to more negative competitor returns. A unique hand-collected sample of 1,038 direct competitors of 228 horizontal acquisitions in Europe empirically supports these hypotheses. Alternative explanations, such as information asymmetry or empire-building, are rejected.
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Keywords
Horizontal Acquisition, Acquisitions, Valuation, Market for corporate control, Ownership structure