June 12, 2018 10:30
The mergers between the companies will bring in greater value for shareholders and improve the market share, indicates a study from theUniversity of Waterloo.
In fact, the data reveal that the share of the market following the merger are larger than the market shares of the two companies combined before they are merged together.
“The increase in the value of the company after the merger may be mainly due to the improved efficiencies versus market power “, points out Anindya Sen, co-author and professor of economics at the University of Waterloo.
“Companies realize synergies of mergers, which benefits all shareholders. Consumers do not pay for necessarily more expensive, and investors benefit from holding shares of these companies in their portfolio, ” he added.
5 000 companies studied
The study compiled data from more than 5,000 publicly traded companies between 1980 and 2003. The data includes the financial information and the patents. The authors indicate that these data are unique as they include information on companies over a long period of time, including periods before, during and after a merger.
“The data have allowed researchers to compare the merged companies to the companies that have not conducted a merger, and to exclude the influence of the industry,” the study says.