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Shareholder value and market share improve when companies merge, confirms a new study from the University of Waterloo.
The study also found that the new company's market share ended up being greater than the market share of the two merged companies combined.
Increase - Value - Post-merger - Efficiencies - Market
"The increase in firm value post-merger may be chiefly attributable to improved efficiencies as opposed to market power," said Anindya Sen, co-author and professor of economics at the University of Waterloo. "Firms are realizing synergies from mergers which benefit all stakeholders. Consumers are not necessarily paying higher prices, and investors are gaining through holding the stocks of such firms in their financial portfolios."
For the study, Sen and lead author Mahdiyeh Entezarkheir, professor of economics at Huron College, Western University, compiled data from multiple sources for more than 5,000 publicly traded U.S. manufacturing companies from 1980-2003, including financial information and patents. The dataset is unique because it included information on companies over an extended period of...
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