Takeover waves
Year of publication: 1999
Issue: 30
Type: Working paper
Abstract
Horizontal takeovers often occur in waves. A sequence of takeovers is obtained in a Cournot setting with cost asymmetries. They are motivated by two different reasons: (i) A low realization of demand increases the profitability of takeovers. (ii) Takeovers raise the profitability of future takeovers. A possible explanantion of merger races is also obtained by showing that firms buying in the first place pay a lower price for their targets.