Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Mergers and Partial Ownership.
(), Hans Jarle Kind
() and Greg Shaffer
Abstract: In this paper we compare the profitability of a merger to
the pro…tability of a partial ownership arrangement and …nd that partial
ownership arrangements can be more profiable for the acquiring and acquired
firm because they can result in a greater dampening of competition. We also
derive comparative statics on the prices of the acquiring firm, the
acquired firm, and the outside firms. In a dual context, we show that a
cross-majority owner may have incentives to sell a fraction of the shares
in one of the firms he controls to a silent investor who is outside the
industry. Aggregate ex post operating profit in the two firms controlled by
the cross-majority shareholder then increases, such that both the
cross-majority shareholder and the silent investor will be better o¤ with
than without the partial divestiture.
Keywords: Media economics; Mergers; Corporate Control; Financial Control; (follow links to similar papers)
JEL-Codes: L13; L22; L82; (follow links to similar papers)
20 pages, January 21, 2010
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