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Merger Failures

Banal-Estanol, A. and Seldeslachts, J. (2011). Merger Failures. JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, 20(2), pp. 589-624. doi: 10.1111/j.1530-9134.2011.00298.x

Abstract

This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post-merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.

Publication Type: Article
Additional Information: This is the accepted version of the following article: Banal-Estanol, A & Seldeslachts, J (2011). Merger Failures. JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, 20(2), pp. 589-624. doi: 10.1111/j.1530-9134.2011.00298.x which has been published in final form at 10.1111/j.1530-9134.2011.00298.x.
Publisher Keywords: mergers, synergies, asymmetric information, complementarities
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics
URI: http://openaccess.city.ac.uk/id/eprint/7701
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