Quantifying the Coordinated Effects of Partial Horizontal Acquisitions

Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose an empirical structural methodology to quantify the coordinated effects of such acquisitions on differentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. The methodology can deal with settings involving all type of owners and ownership rights: owners that can be internal to the industry (rival firms) and external to the industry; and ownership rights that can involve financial interests and corporate control, can be direct and indirect, can be partial or full. We provide an empirical application of our proposed methodology to several acquisitions in the wet shaving industry. The results seem to suggest that the incentives of (i) the acquiring party’s firm to coordinate are non-decreasing after an acquisition (independently of whether it involves full or partial financial or corporate control rights, by internal or external owners), (ii) the acquired firm to coordinate are non-decreasing after acquisitions involving full or partial corporate control rights, but non-increasing after acquisitions involving full or partial financial rights, and (iii) the remaining firms in the industry to coordinate are non-increasing after an acquisition (again, independently of whether it involves full or partial financial or corporate control rights, by internal or external owners).