Mergers and Partial Ownership

Øystein Foros, Hans Jarle Kind and Greg Shaffer

No 2912, CESifo Working Paper Series from CESifo

Abstract: In this paper we compare the profitability of a merger to the profitability of a partial ownership arrangement and find that partial ownership arrangements can be more profitable for the acquiring and acquired firm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firms. In a dual context, we show that a cross-majority owner may have incentives to sell a fraction of the shares in one of the firms he controls to a silent investor who is outside the industry. Aggregate ex post operating profit in the two firms controlled by the cross-majority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better off with than without the partial divestiture.

Keywords: media economics; mergers; corporate control; financial control (search for similar items in EconPapers)
JEL-codes: L13 L22 L82 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Mergers and partial ownership (2011)
Working Paper: Mergers and Partial Ownership (2010)
Working Paper: Mergers and Partial Ownership (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2912

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