We analyze the optimal policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and firms choose among alternative mergers. In our model, the optimal policy of an antitrust authority that seeks to maximize expected consumer surplus imposes a tougher standard on "larger" mergers, i.e., those involving firms with a larger pre-merger market share. The optimal policy is a response to a bias in firms' proposal incentives: firms always propose a larger merger when it is better for consumers than a smaller one, but sometimes will propose the larger one even when it is worse for consumers.
Competition in some markets is a contest. This paper studies the merger incentives in such markets. Merger can be profitable. The profitability depends on the post-merger contest structure, the discriminatory power of the contest and on the number of contestants.
PurposeThis study aims to confirm earlier findings that differences between merger and acquisition (M&A) participant firms are a hurdle for successful mergers and shows that merger outcomes can also be affected by the post-merger integration duration (PMID).Design/methodology/approachExperimental research on distinct cultures developed within experimental pre-merger subject groups is used to compare pre- and post-integration performances.FindingsThis study finds that firm distance (i.e. inherent differences between pre-merger firms) negatively influences merger success; no significant relationship between firm distance and PMID exists and PMID is positively related to merger success. Specifically, a slower integration minimizes conflicts between merger partners, enhances trust-building and reduces the disruption of existing resources and processes in both firms, which may benefit M&As. By contrast, a fast integration that shortens the overall integration process may discourage the combined entity from recognizing the intended synergy quickly.Research limitations/implicationsThe new finding that PMID can affect merger outcomes invites empirical validation. This study presents experimental evidence that prolonged, well-structured post-merger integration may compensate for the negative time-variant issues associated with PMID.Practical implicationsOrganizational support for collaborative learning between professional members should be a strategic consideration for firms so that acquiring business capabilities can be more natural and cost-efficient than building internal capabilities despite possibly slowing down the integration process. Encouraging a transfer of technical and client knowledge between the combined members can create value and understand differences in both the form and content of each firm's knowledge base and the pre-existing mechanisms for sharing knowledge. It may lower the level of resistance in knowledge transfer.Originality/valueWhile M&As may better facilitate the cost-effective expansion of business offerings than building capabilities internally, they can require considerable time, preventing many firms from realizing their intended outcomes. Nevertheless, less attention has been focused on PMID and its influence on M&As. This study is the first to use experimental research to examine the effects of PMID on merger success.
