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2010/2011  KAN-VOE32  Mergers and Acquisitions

English Title
Mergers and Acquisitions

Course Information

Language English
Point 7,5 ECTS (225 SAT)
Type Elective
Level Full Degree Master
Duration One Semester
Course Period Autumn
Time Table Please see course schedule at e-Campus
Study Board
Study Board for MSc in Advanced Economics and Finance
Course Coordinator
  • Peter Bogetoft - Department of Economics
Main Category of the Course
  • Economics, macro economics and managerial economics
  • Corporate and Business Strategy
  • Finance
  • Organization
Last updated on 29 maj 2012
Learning Objectives
The goal of the course is that the students after having successfully participated in the course are able to:
  • Describe and discuss different motives for M&As
  • Describe and discuss the functioning of the market for corporate control in relation to takeovers
  • Describe and discuss how macroeconomic conditions affect M&A activity
  • Describe and discuss the problems of integrating the organizations involved in M&As
  • Estimate efficiency gains from M&As using econometric techniques
  • Solve formal contract theoretical models using tools from mathematical optimization, contract theory, and game theory
  • Analyze questions related to M&As drawing upon one or more theories and to present this analysis in writing using a scientific and concise language
  • Analyze formal models that are variations of the models and theories covered in the course and to provide economic intuition for the results obtained
Students are expected to have some understanding of game and contract theory, industrial organization and corporate finance before the course.  
Four hour written exam with all exam aids allowed
Marking Scale 7-step scale
Censorship No censorship
Exam Period December/January
Aids Open Book, Written Aid is permitted
Duration 4 Hours
Prerequisites for Attending the Exam
Course Content

The aim of the course is to provide an understanding ofthe role of mergers and acquisitions (M&As) for individual firms, industries, and entire economies. It draws on recent works in both industrial organization and corporate finance in order to give different perspectives on M&As. A number of topics will be covered during the course such as motives for M&As, the effects of M&As on productivity, the functioning of the market for corporate control,explanations for merger waves, and post-merger integration problems. Formal analysis of game-theoretic models is an integral part of the course. Therefore, knowledge of basic game theory and contract theory is expected.

Further Information

The course has a duration of 15 weeks and has one weekly lecture of 2 hours. In some weeks, the class activities will be extended to include student workshops, student presentations in class, and exercises.

The course will cover the following aspects of M&A:

Theory of the firm and motives for integration

  1. Asset specificity and the hold-up problem
  2. Synergies and market power
  3. Financial synergies

Estimating efficiency gains from M&As

Hostile takeovers

Macroeconomic conditions and M&A activity

Post-M&A integration problems

The market for corporate control and M&As


Theory of the firm and motives for integration

  1. Asset specificity and the hold-up problem

Grossman, S. and O. Hart, "The Costs and Benefits of Ownership: A Theory of Lateral and Vertical Integration," Journal of Political Economy, 1986, 94, 691-719.

Hart, O. and J. Moore, "Property Rights and the Nature of the Firm," Journal of Political Economy, 1990, 98, 1119-1158.

  1. Synergies and market power

Fridolfsson, S.-O. and J. Stennek, “Why mergers reduce profits and raise share prices—a theory of preemptive mergers,” Journal of the European Economic Association, 2005, 3, 1083–1104.

Salant, S. W., S. Switzer, and R. J. Reynolds, “Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium,” Quarterly Journal of Economics, 1983, 98, 185-199.

Perry, M. K and R. H. Porter, “Oligopoly and the Incentive for Horizontal Merger,” American Economic Review, 1985, 75, 219–227.

  1. Financial synergies

Inderst, R. and H. Müller, “Internal versus External Financing: An Optimal Contracting Approach,” The Journal of Finance, 2003, LVIII, 1033-1062.

Cestone, G. and C. Fumagalli, “The Strategic Impact of Resource Flexibility in Business Groups,”
RAND Journal of Economics, 2005, 193-214.

Leland, H., “Financial Synergies and the Optimal Scope of the Firm: Implications for Mergers, Spinoffs, and Structured Finance,” Journal of Finance, 2007, 62, 765-807.

Estimating efficiency gains from M&As

Bogetoft, P, and D.Wang, “Estimating the Potential Gains from Mergers,” Journal of Productivity Analysis, 2005, 23, 145-171

Bogetoft, P. and K.Katona, Efficiency Gains from Mergers in the Healthcare Sector, Research Paper 2008-1, NZA, The Netherlands, 2008, pp. 1-211, Part II.

Bogetoft, P and T.E. Gammeltvedt, Mergers in Norwegian Elecricity Distribution: A Cost Saving Exercise, WP, 2006

Andrade, G., M. Mitchell, and E. Stafford, “New Evidence and Perspectives on Mergers,” Journal of Economics Perspectives, 2001, 15, 103-120.

Hostile takeovers

Tirole, J., The Theory of Corporate Finance, Ch. 11, 2006, Princeton University Press.

Grossman, S. and O. Hart, “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation,” 1980, 11, Bell Journal of Economics, 42-64.

Bulow, J., M. Huang and P. Klemperer, “Toeholds and Takeovers,” Journal of Political Economy, 1999,107, 427–454.

Macroeconomic conditions and M&A activity

Jovanovic, B. and P. L. Rousseau, “Mergers as Reallocation,” The Review of Economics and Statistics, 2008, 90, 765-776.

Tirole, J., The Theory of Corporate Finance, Ch. 14, 2006, Princeton University Press.

Post-M&A integration problems

Meyer, Milgrom, and Roberts (1992): "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics and Management Strategy,1, 9-35.

Carillo and Gromb (2006): “Cultural Inertia and Uniformity in Organizations”, Journal of Law, Economics, and Organization, 1-29.

The market for corporate control and M&As

Dodd, P. and J. Warner, “On Corporate Governance: A Study of Proxy Contests,” Journal of Financial Economics, 1985, 2, 401-438.

Gompers, P. A., L. L. Ishii, and A. Metrick, “Corporate Governance and Equity Prices,” Quarterly Journal of Economics, 2003, 188, 107-155.

Martynova, M. and L. Renneboog, The Performance of the European Market for Corporate Control:

Evidence from the 5th Takeover Wave, Working Paper, The University of Sheffield Management School.