Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis

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ID: 292311
2010
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Abstract
We examine how product differentiation influences mergers and acquisitions and the ability of firms to exploit product market synergies.Using novel text-based analysis of firm 10K product descriptions, we find three key results.(1) Firms are more likely to enter restructuring transactions when the language describing their assets is similar to all other firms, consistent with their assets being more redeployable.(2) Targets earn lower announcement returns when similar alternative target firms exist.(3) Acquiring firms in competitive product markets experience increased profitability, higher sales growth, and increased changes in their product descriptions when they buy target firms that are similar to them and different from rival firms.Our findings are consistent with similar merging firms exploiting synergies to create new products and increase their product differentiation relative to ex-ante rivals.
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openalex_W3021143228 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Gerard Hoberg, Gordon M. Phillips
Journal review of financial studies
Year 2010
DOI
10.1093/rfs/hhq053
URL
https://doi.org/10.1093/rfs/hhq053
Keywords Keywords not found

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