Potential Sources of Value from Mergers and Their Indicators. (June 2018)

• Record Type: Journal Article
• Authors: Schilling, Melissa A.
• Other Names: Gundlach Gregory T. guest-editor.; Moss Diana guest-editor.
• Is Part Of: Antitrust bulletin. Volume 63:Number 2(2018)
• Page Start: 183
• Page End: 197
• Publication Date: 2018-06
• Subjects: mergers -- acquisitions -- value creation -- minimum efficient scale -- ecosystems -- market power; Antitrust law -- United States -- Periodicals; Restraint of trade -- United States -- Periodicals; 343.73072105
• DOI: 10.1177/0003603X18770068
• Languages: English
• ISSNs: 0003-603X

Abstract

Firms engage in mergers for many reasons, some of which create value for both the firm's shareholders and society, some that create value only for the firm's shareholders, and some that fail even to do that. A considerable body of research concludes that most mergers do not create value for anyone, except perhaps the investment bankers who negotiated the deal. For a merger to create value, it will usually be necessary that one or both parties is below minimum efficient scale or has valuable underutilized assets. Furthermore, unless heavy coordination and long-term commitment are required, many sources of value from mergers can be achieved through collaboration agreements or other contracts, with less risk to the firms and to economic efficiency. This article outlines the major sources of potential value in mergers, and indicators that can give us insight into a merger's true motives and its likelihood of creating value.