Merger Analysis (United States)
There are three different types of mergers: horizontal, vertical, and conglomerate. We discuss all three and explain why mergers can be a desirable way to expand a firm. Then we turn to the evidence on the amount of merger activity. Finally, we address one of the important questions surrounding mergers: whether they are motivated by the desire to improve efficiency or by the desire to acquire market power. Although the evidence is sometimes ambiguous, the overwhelming consensus is that most merger activity in the United States is motivated by efficiency considerations.
KeywordsAntitrust enforcement Conglomerate mergers Economies of scale Economies of scope Efficiency Horizontal mergers Litigation Market power Mergers Reputation Takeovers Taxation of corporate profits Transaction costs Vertical mergers
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