Eat or be eaten : a theory of mergers and merger waves / Gary Gorton, Matthias Kahl, Richard Rosen.

Author
Gorton, Gary [Browse]
Format
Book
Language
English
Published/​Created
Cambridge, Massachusetts : National Bureau of Economic Research, 2005.
Description
1 online resource (64 pages) : illustrations.

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Subject(s)
Author
Series
Working Paper Series (National Bureau of Economic Research) ; Number w11364. [More in this series]
Summary note
In this paper, we present a model of defensive mergers and merger waves. We argue that mergers and merger waves can occur when managers prefer that their firms remain independent rather than be acquired. We assume that managers can reduce their chance of being acquired by acquiring another firm and hence increasing the size of their own firm. We show that if managers value private benefits of control sufficiently, they may engage in unprofitable defensive acquisitions. A technological or regulatory change that makes acquisitions profitable in some future states of the world can induce a preemptive wave of unprofitable, defensive acquisitions. The timing of mergers, the identity of acquirers and targets, and the profitability of acquisitions depend on the size of the private benefits of control, managerial equity ownership, the likelihood of a regime shift that makes some mergers profitable, and the distribution of firm sizes within an industry.
Source of description
Description based on publisher supplied metadata and other sources.
Doi
  • 10.3386/w11364
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