Working Paper No. 630

Mergers by Partial Acquisition

Published: October 20, 2004Pages: 23Keywords: Acquisition; Antitrust; Insiders' Dilemma; Mergers; ToeholdsJEL-codes: G34; L12; L13; L41

Mergers by Partial Acquisition Tobias Lindqvist


This paper evaluates partial acquisition strategies. The model allows for buying a share of a firm before the actual acquisition takes place. Holding a share in a competing firm before the acquisition of another firm, outsider-toehold, eliminates the insiders' dilemma, i.e. profitable mergers do not occur. This strategy may thus be more profitable for a buyer than acquiring entire firms at once. Furthermore, the insiders' dilemma arises from the assumption of a positive externality on the outsider firm and acquiring an outsider-toehold is thus a signal of an anti-competitive merger.

 

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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