Monday, August 6, 2018
Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)) ; Persson, Lars (Research Institute of Industrial Economics (IFN)); and Tåg, Joacim (Research Institute of Industrial Economics (IFN)) explore Threatening to Buy: Private Equity Buyouts and Antitrust Policy.
ABSTRACT: Private equity firms (PE firms) have become common owners of established firms in concentrated markets. We show that the threat of a PE acquisition can trigger incumbent mergers in an otherwise mergerstable industry. This can help antitrust authorities maximize consumer surplus because previously privately unprofitable – but consumer surplus-enhancing – mergers now take place. We thus predict that merger waves among incumbents should follow the development of a local PE industry.