Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 13/2008: Waiting to Merge

Eileen Fumagalli () and Tore Nilssen ()
Additional contact information
Eileen Fumagalli: IEFE, Università Bocconi, Milan
Tore Nilssen: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: We set up a sequential merger to study a firm's incentives to pass up on an opportunity to merge with another firm. We find that such incentives may exist when there are efficiency gains from a merger, firms are of different sizes, there is an anthitrust authority present to approve mergers, and there is sufficient alignment of interests between the antitrust authority and the firms. We point out three dstinctive motives for not merging: the external-effect motive, the bargaining-power motive, and the pill-sweetening motive.

Keywords: Mergers; merger incentives

JEL-codes: G34; L11; L13; L41

35 pages, June 30, 2008

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