Antitrust Holdup Source, Cross-National Institutional Variation, and Corporate Political Strategy Implications for Domestic Mergers in a Global Context

Abstract

Managers are increasingly uncertain over the source (home-nation or foreignnation) of antitrust holdup for domestic mergers with significant international implications. I propose a conceptual framework that predicts the source of antitrust holdup for domestic mergers. Under idealized institutional assumptions, I find an industry's global competitiveness to be the primary driver behind holdup source: a contention supported by empirical tests based on the merger policies of 27 antitrust jurisdictions over the 1992-2000 period. I also relax the idealized institutional conditions to yield more precise propositions tailored to the cross-national environment for antitrust policy. Finally, I generate prescriptive propositions that yield implications for effective political strategies.

The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger

“…Second, drawing merger observations from those transactions analysed by the EC clearly leads to European firms being well represented in the sample. Yet Clougherty (2005) noted that managers are uncertain over the source (home‐nation or foreign‐nation) of antitrust holdup for domestic mergers. Accordingly, EU antitrust officials vet many different types of mergers with firms originating from both EU and non‐EU nations.…”

Viceroys or Emperors? An Institution‐Based Perspective on Merger and Acquisition Prevalence and Shareholder Value

“…However, following an in‐depth review of the literature, Haleblian and colleagues () concluded that the field focuses predominantly on firm‐level characteristics. Several recent studies nevertheless show that factors that characterize the institutional context also are important for understanding M&A behavior (e.g., Beccalli and Frantz, ; Bris and Cabolis, ; Clougherty, ). This work suggests that the M&A process, ranging from initiation through deal completion to implementation, is contextually bound.…”

“…Zhang et al () found that M&As are less likely to succeed if the institutional quality of the target country is low, while Marquis and Huang () demonstrated how differences in institutional conditions at the time of organizational founding imprint heterogeneous propensities towards acquisitions as a growth vehicle. Moreover, scholars identified a variety institutional characteristics that shape the M&A process, such as access to credit (Di Giovanni, ), quality of accounting standards (Bris and Cabolis, ), strictness of antitrust laws (Clougherty, ), enforcement of laws and regulations (Meyer et al, ), size of equity funds (Qiu, ), regulatory quality (Beccalli and Frantz, ), and state intervention levels (Serdar Dinc and Erel, ).…”

Effective European Antitrust: Does Ec Merger Policy Generate Deterrence?

“…Commentators (e.g., Bergman et al ) have argued that withdrawing a merger in the second phase represents a virtual prohibition, as merging parties often formally withdraw a merger before an actual prohibition is commuted. For instance, GE's acquisition of Honeywell was officially a phase‐2 withdrawal, as the EC's conditions for allowing the merger to proceed represented an “effective prohibition” of the transaction (Clougherty ). Given that both phase‐2 prohibitions and phase‐2 withdrawals suggest a failure to find acceptable remedies that alleviate anti‐competitive concerns, we aggregate phase‐2 prohibitions and phase‐2 withdrawals into “phase‐2 preventions.” Nevertheless, unreported estimations that keep both policy instruments separate yield qualitatively identical results.…”