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Mergers in the Digital Economy

Author

Listed:
  • Gautier, Axel

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Lamesch, Joe

Abstract

Over the period 2015–2017, the five giant technologically leading firms, Google, Amazon, Facebook, Apple and Microsoft (GAFAM) acquired 175 companies, from small startups to billion dollar deals. In this paper, we provide detailed information and statistics on the merger activity of the GAFAM and on the characteristics of the firms they acquire. One of the most intriguing features of these acquisitions is that, in the majority of cases, the product of the target is discontinued under its original brand name post acquisition and this is especially true for the youngest firms. There are three reasons to discontinue a product post acquisition: the product is not as successful as expected, the acquisition was not motivated by the product itself but by the target’s assets or R&D effort, or by the elimination of a potential competitive threat. While our data does not enable us to screen between these explanations, the present analysis shows that most of the startups are killed in their infancy. This important phenomenon calls for tighter intervention by competition authorities in merger cases involving big techs.

Suggested Citation

  • Gautier, Axel & Lamesch, Joe, 2020. "Mergers in the Digital Economy," LIDAM Reprints CORE 3136, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3136
    DOI: https://doi.org/10.1016/j.infoecopol.2020.100890
    Note: In: Information Economics and Policy, 2021, vol. 54, 100890
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    Citations

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    Cited by:

    1. Igor Letina & Armin Schmutzler & Regina Seibel, 2024. "Killer Acquisitions And Beyond: Policy Effects On Innovation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 591-622, May.
    2. Carolin Ioramashvili & Maryann Feldman & Frederick Guy & Simona Iammarino, 2024. "Gathering round Big Tech: How the market for acquisitions concentrates the digital sector," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 17(2), pages 293-306.
    3. Pauline Affeldt & Reinhold Kesler, 2021. "Competitors’ Reactions to Big Tech Acquisitions: Evidence from Mobile Apps," Discussion Papers of DIW Berlin 1987, DIW Berlin, German Institute for Economic Research.
    4. Steffen, Nico & Wiewiorra, Lukas & Kroon, Peter, 2021. "Wettbewerb und Regulierung in der Plattform- und Datenökonomie," WIK Discussion Papers 481, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    5. Nicolas Petit & David J Teece, 2021. "Innovating Big Tech firms and competition policy: favoring dynamic over static competition [Patterns of industrial innovation]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(5), pages 1168-1198.

    More about this item

    Keywords

    Mergers ; GAFAM ; platform ; digital markets ; competition policy ; killer acquisition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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