Horizontal acquisitions and buying power: A product market analysis

Horizontal mergers exert price pressure on dependent suppliers and adversely affect their performance. Consistent with the theory of countervailing power, concentrated suppliers and those with greater barriers to entry experience larger price declines after consolidation downstream. Time-series resu...

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Bibliographic Details
Published in:	Journal of financial economics 2011, Vol.99 (1), p.97-115
Main Authors:	Bhattacharyya, Sugato, Nain, Amrita
Format:	Article
Language:	eng
Subjects:	Acquisitions Buying power Consolidation Economic activity Economic concentration Economic theory Horizontal integration Market entry Mergers Purchasing power Studies Take-overs Takeovers Takeovers Mergers Buying power Time series
Online Access:	Get full text
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Summary:	Horizontal mergers exert price pressure on dependent suppliers and adversely affect their performance. Consistent with the theory of countervailing power, concentrated suppliers and those with greater barriers to entry experience larger price declines after consolidation downstream. Time-series results suggest that consolidation in dependent supplier industries follows mergers in main customer industries, indicating that consolidation activity travels up the supply chain. The findings are broadly consistent with pervasive beliefs in the business community about the buying power effects of horizontal mergers.
ISSN:	0304-405X 1879-2774