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Conglomerate Mergers: Vertical Mergers in Disguise?

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  • Tommy Staahl Gabrielsen

Abstract

The article offers a complementary theory for conglomerate mergers. The central argument is that a conglomerate merger may be a vertical merger in disguise. The acquisition of a non-competing firm takes place to achieve control over the target's distribution channel that otherwise could be used by rival entrants. The analysis shows that an entrant with a very differentiated product is accommodated, and an entrant with a close substitute is foreclosed through a conglomerate merger. There also exist equilibria with partial foreclosure where the entrant is forced onto less efficient distribution channels. Incumbent firms' mergers to achieve foreclosure is socially wasteful.

Suggested Citation

  • Tommy Staahl Gabrielsen, 2003. "Conglomerate Mergers: Vertical Mergers in Disguise?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(1), pages 1-16.
    • Handle: RePEc:taf:ijecbs:v:10:y:2003:i:1:p:1-16
    DOI: 10.1080/1357151032000043294
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    Cited by:

    1. Junmao Chiu & Huimin Chung & Shih-Chang Hung, 2018. "The Impact Of A Cross-Border Conglomerate Merger On The Target Firm And Its Rivals - A Case Study Of Foxconn’S Acquisition Of Sharp," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 12(1), pages 263-277.
    2. Hana BOR & Avraham KETKO, 2019. "A University Reinvents Itself: A Case Study For Understanding Strategic Mergers And Integration Between Academic Institutions," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 20(3), pages 241-258, July.

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