Wednesday, March 21, 2018
Pehr-Johan Norbäck, Research Institute of Industrial Economics (IFN), Lars Persson, Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR), and and Joacim Tåg, Research Institute of Industrial Economics (IFN) are 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 merger-stable 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.