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Product Market Synergies and Competition in Mergers and Acquisitions: A Text Based Analysis (2009)
| Citations: | 31 - 4 self |
BibTeX
@MISC{Hoberg09productmarket,
author = {Gerard Hoberg and Gordon Phillips and Rich Matthews and David Robinson and Matthew Rhodes-kropf},
title = {Product Market Synergies and Competition in Mergers and Acquisitions: A Text Based Analysis},
year = {2009}
}
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Abstract
We examine how product similarity and competition influence mergers and acquisitions and the ability of firms to exploit product market synergies through asset complementarities. Using novel text-based analysis of firm 10-K product descriptions, we find three key results. (1) Firms are more likely to enter mergers with firms whose language describing their assets is similar. (2) Transactions in competitive product markets with similar acquirer and target firms experience increased stock returns and real longer-term gains in cash flows and higher growth in their product descriptions. (3) These gains are higher when the target is less similar to the acquirer’s closest rivals, and when firms have the potential for unique products. Our findings are consistent with firms merging and buying assets to exploit asset complementarities and to create new products to increase product differentiation.
Keyphrases
product market synergy asset complementarity stock return product differentiation cash flow product similarity key result novel text-based analysis competition influence merger similar acquirer product description new product competitive product market real longer-term gain unique product firm 10-k product description target firm acquirer closest rival
