Working Paper No. 777

Getting a Better Price: Strategic Behavior before Changes in Ownership of Corporate Assets

Published: November 13, 2008Pages: 34Keywords: Mergers & Acquisitions; Ownership; Auctions; Strategic Investments; Merger EvaluationsJEL-codes: L13; L40; L66
Published version

Getting a Better Price: Strategic Behavior before Changes in Ownership of Corporate Assets Richard Friberg, Pehr-Johan Norbäck and Lars Persson


We propose a model of investments prior to corporate ownership changes. We derive conditions under which the selling of a firm triggers overinvestment by both the seller and the buyer prior to the asset transfer. In a setting with Cournot competition, we show that these incentives can drive the consumer prices in a post-acquisition duopoly below those of an ongoing triopoly. Our analysis warns against a mechanical use of pre-merger benchmarks in ex post merger evaluations.

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
Mob: +46 73 574 3379
pehr-johan.norback@if...

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

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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