European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 1204: The Negative Effects of Mergers and Acquisitions on the Value of Rivals

François Derrien (), Laurent Frésard (), Victoria Slabik () and Philip Valta ()

Abstract: Average stock price reactions of industry rivals in horizontal U.S. mergers and acquisitions around deal announcements are robustly negative. This finding is in contrast to the results in the existing literature, which focuses on smaller samples of deals involving mostly publicly listed firms. Rivals’ returns are more negative in growing and concentrated industries. Moreover, the negative rivals’ stock price reactions are related to future decreases in operating performance, increased probability of bankruptcy and challenges by antitrust authorities, and increased probability of rivals’ future acquisitions. Overall, these results suggest that M&As have strong competitive effects for the rivals of target companies.

Keywords: M&As

JEL-codes: G34

53 pages, First version: May 1, 2017. Revised: October 4, 2017.

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