Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162838
Authors: 
Shekhar, Shiva
Wey, Christian
Year of Publication: 
2017
Series/Report no.: 
DICE Discussion Paper 260
Abstract: 
We examine the competitive effects of a passive partial ownership (PPO) when it serves as an instrument for the acquirer firm to learn the merger synergies with the target firm in advance. The realization of a synergy is uncertain ex ante, so that a direct merger exhibits a downside risk not only for the merging candidates but also for consumers. We show that minority shareholdings can reduce this downside risk as they allow for a sequential takeover where the acquirer takes an initial minority share, becomes an insider, and learns the merger synergy. We show how this feature of PPOs affects a firm's takeover strategy and the decision problem of the antitrust authority. We derive implications for a merger control approach to PPO acquisitions, where we examine a forward looking price test and a safeharbor rule.
Subjects: 
Merger Control
Passive Partial Ownership
Synergies
JEL: 
L13
L41
ISBN: 
978-3-86304-259-2
Document Type: 
Working Paper

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