Do mergers and acquisitions affect the competition situation? Evidence from Finland

Abstract

The objective of this study is to investigate the competition impacts of mergers and acquisitions (M&As). The direct competition effect on prices cannot be measured owing to the lack of establishment and fi rm level data on prices. Therefore we mainly examine the effects on turnover. We assume that M&A’s direct infl uence on those fi rms’ sales which are involved in M&As and, on the other hand, its indirect infl uence on the fi rms’ sales which are not involved in M&As already describe the competition effects. If an M&A weakens competition, the turnover of a target fi rm’s establishment or an acquiring fi rm’s establishment should decrease and, in addition, the turnover of other fi rms’ establishments should increase. The latter effect materializes when the direct effect makes room for the other fi rms to expand. This analysis is supplemented by an evaluation how M&As affect profi ts and the creation and exit of plants.

The sale impacts are investigated, primarily, at the establishment level. Our data comprises two parts: the fi rst includes the target companies’ establishments and the second the acquiring companies’ establishments. In both data sets the M&As are characterized in various ways. The defi ned industrial proximity allows us to divide M&As into horizontal and vertical transactions. M&A data sets are then combined with the other data sets of Statistics Finland. The establishment-level data can also be aggregated to the fi rm level. In the data set for target fi rms an establishment is a part of a cross-border M&A when it belongs to a fi rm which is purchased by a foreign company, whereas, in the data set for purchasing fi rms the cross-border M&A refers to a case in which a Finnish fi rm buys a foreign fi rm. The data then includes information only about those operations of the Finnish fi rms. When analysing the impacts of MAs the data sets are divided into three different industry blocks which are: 1) manufacturing, 2) trade including hotels and restaurants and 3) other services and construction.

According to the results, the horizontal domestic M&As tend to restrict competition in service sectors but not in manufacturing. The other domestic M&As, instead, have no clear competition repressing impact. The cross-border M&A – in which a foreign fi rm buys a domestic fi rm – decreases competition in manufacturing and in other services (included construction). The internal restructurings have no unambiguous competition impacts.

• ISSN: 1236-7176
• ISBN: 978-952-209-039-3
• Press Release in Finnish
• Publication in PDF-format