Vertical integration by means of shareholding interlocks

Flath, David

doi:10.1016/0167-7187(89)90004-0

Cited by 60 publications

(43 citation statements)

References 4 publications

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“…Consequently, a scenario as such ought not be assessed in isolation and, as in the case of fully-fledged mergers, it should take into account the actual level and features of the control acquired. 142 Somewhat comparable conclusions are also drawn by Flath,143 who argues that predicting the effects of noncontrolling vertical minority shareholdings is significantly more complicated when compared to horizontal holdings, since the effects on price and advantages to consumers may vary greatly.…”

Section: Vertical Transactionssupporting

confidence: 49%

EU Merger Control and Acquisitions of (Non-Controlling) Minority Shareholdings - The State of Play

Rusu¹

2014

SSRN Journal

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This contribution investigates whether a regulatory / enforcement gap exists in the current EU system of concentration control and if so, what is its degree of seriousness, in order to possibly warrant regulatory intervention at EU level. In this respect, the evidence stemming from economic theory regarding the potential anticompetitive effects that (non-controlling) minority stake acquisitions may give rise to, is discussed. Furthermore, the existing constraints (mainly related to company law instruments) that may alleviate the need for merger control intervention are dealt with. Also, the appropriateness of the existing legal tools is evaluated, with a reference to the Commission's past practice and the case-law of the EU Courts. In this respect, due attention is paid to the Ryanair / Aer Lingus case, given the complex problems it raised in connection with non-controlling minority shareholding acquisitions. This contribution concludes that the European merger control system exhibits certain enforcement / regulatory gaps that may indeed require (regulatory) intervention.

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Section: Vertical Transactionssupporting

confidence: 49%

EU Merger Control and Acquisitions of (Non-Controlling) Minority Shareholdings - The State of Play

Rusu¹

2014

SSRN Journal

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“…This is likely to be true when α s is high and α c = α 1 low. The profitability threshold 29 Finally, the effect of higher controlling initial interests is no more ambiguous, contrary to the case of direct acquisitions: they always discourage further acquisitions. As silent initial toeholds encourage them, they play in opposite directions.…”

Section: Propositionmentioning

confidence: 99%

“…The non controlling share could then be profitable for the owner. 4 In a vertical framework, Flath (1989) shows that symmetric vertical ownerships in a Cournot model may enhance the mark-up of firms and could then be detrimental to competition, contrary to the result of vertical integration (elimination of the double margin phenomena). Dasgupta and Tao (2000) showed that a downstream share in an upstream 4 Basically, this is the same argument than the one in Salant, Switzer and Reynolds (1983) which shows the unprofitability of horizontal mergers.…”

Section: Introductionmentioning

confidence: 99%

Incentives for Partial Acquisitions and Real Market Concentration

Charléty¹,

Fagart²,

Souam³

2009

JITE

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We analyze the incentives of a controlling shareholder of a firm to acquire, directly or indirectly through his firm, shares in a competitor. We charaterize the conditions under which these partial acquisitions are profitable for this dominant shareholder as well as the equilibrium toehold and its nature: controlling or silent. We find that while this shareholder gains, the acquisition is detrimental to minority shareholders of his firm, or of the target, or even of both. We show that the incentives are enhanced if the dominant shareholder initially holds silent stakes in rivals while controlling interests may discourage them. Moreover, we find that partial acquisitions always lead to a decrease in the joint profit of the two firms involved, and an increase in competitors's profits as the market becomes less competitive.

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“…They show that the e¤ects of a partial ownership in a rival depend critically on whether corporate control is transferred to the acquiring …rm or not. See also Flath (1989;1991), Malueg (1992), Reitman (1994), and Gilo et al (2006).…”

mentioning

confidence: 99%

Mergers and partial ownership

Foros

Kind

Shaffer

2011

European Economic Review

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In this paper we compare the pro…tability of a merger to the pro…tabil-ity of a partial ownership arrangement and …nd that partial ownership arrangements can be more pro…table for the acquiring and acquired …rm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring …rm, the acquired …rm, and the outside …rms. 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 …rms he controls to a silent investor who is outside the industry. Aggregate ex post operating pro…t in the two …rms controlled by the crossmajority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better o¤ with than without the partial divestiture.JEL classi…cation: L13, L22, L82

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Vertical integration by means of shareholding interlocks

Cited by 60 publications

References 4 publications

EU Merger Control and Acquisitions of (Non-Controlling) Minority Shareholdings - The State of Play

EU Merger Control and Acquisitions of (Non-Controlling) Minority Shareholdings - The State of Play

Incentives for Partial Acquisitions and Real Market Concentration

Mergers and partial ownership

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