European Business Schools Librarian's Group
ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School
No DR 04004: Real market concentration through partial acquisitions
Patricia Charléty-Lepers (), Marie-Cécile Fagart () and Saïd Souam ()
Additional contact information
Patricia Charléty-Lepers: ESSEC Business school, Postal: ESSEC Bibliothèque, Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE CEDEX , FRANCE,
Marie-Cécile Fagart: University of Rouen and CREST-LEI (Center for Research in Economics and Statistics-Laboratory of industrial economics), Postal: 28 rue des Saints Pères, 75007 Paris, FRANCE
Saïd Souam: University of Tours and CREST-LEI (Center for Research in Economics and Statistics-Laboratory of industrial economics), Postal: 28 rue des Saints Pères, 75007 Paris, FRANCE
Abstract: We study horizontal partial acquisitions in an oligopolistic industry in the absence of synergies. Contrary to existing results, we find that a dominant shareholder may choose to acquire shares in a competitor although the aggregate profit of the group of firms under his control, and even the greater group of firms in which he has a stake, is reduced. This is due to a “favorite” effect: after the acquisition, the dominant shareholder will favor the firm in which he eventually holds the relatively higher share to the detriment of shareholders of the other firms. For this reason, a block of shares can be bought at a discount when the value of the firm of the initiator decreases post acquisition. Moreover, we show that the existence of initial silent toeholds in rivals enhances the incentive for a dominant shareholder to buy shares in other firms in the industry, whereas controlling ones may discourage them.
Keywords: Horizontal partial acquisitions; Real market concentration; Dominant shareholder; Minority shareholders; Silent interests
32 pages, May 2004
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