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Showing 4 Publications by Mario Leccese
Popular Media The draft Merger Guidelines released by the United States Department of Justice and the Federal Trade Commission (the Agencies) on July 19 feature many significant changes from earlier Guidelines. Of . . .
The draft Merger Guidelines released by the United States Department of Justice and the Federal Trade Commission (the Agencies) on July 19 feature many significant changes from earlier Guidelines. Of the 13 guidelines highlighted in the draft, two are particularly new and important for tech acquisitions. One is Guideline #4, which states that “mergers should not eliminate a potential entrant in a concentrated market.” The other is Guideline #9, which says that “when a merger is part of a series of multiple acquisitions, the agencies may examine the whole series” (emphases added).
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Regulatory Comments The Draft Merger Guidelines (DMGs)[1] released by the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) on July 19, 2023 feature many . . .
The Draft Merger Guidelines (DMGs)[1] released by the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) on July 19, 2023 feature many significant changes from earlier Merger Guidelines.[2] Of the 13 guidelines highlighted in the DMGs, two are particularly new and important for tech acquisitions. One is Guideline #4, which states that “mergers should not eliminate a potential entrant in a concentrated market” and the other is Guideline #9, stating that “when a merger is part of a series of multiple acquisitions, the agencies may examine the whole series” (emphases added).
While the DMGs provide hardly any details on #9, they do offer a list of evidence that the agencies would consider in support of #4. For example, the DMGs state that a firm’s “sufficient size and resources to enter,” expansion “into other markets in the past,” current participation “in adjacent or related markets,” being considered by industry participants as “a potential entrant,” as well as “subjective evidence that the company considered entering absent the merger” can all constitute evidence for the firm’s reasonable probability of entry. More importantly, a reasonable probability of entry is presumed to result in deconcentration or other significant benefits for competition, unless there is substantial direct evidence that the competitive effect would be de minimis. Simply put, a merger that is deemed to reduce a reasonable probability of entry is presumed to harm market competition.
Guideline #4 appears to hinge on the implicit assumption that, but for mergers and acquisitions (M&A), all entities with a reasonable probability of entry would likely enter the market, vigorously compete with each other, and significantly promote market competition in the absence of M&A. To avoid a linguistic debate on “reasonable,” “likely” and “significant,” it may be worthwhile to examine this assumption in a simple illustrative example.
[1] https://www.justice.gov/d9/2023-07/2023-draft-merger-guidelines_0.pdf.
[2] See a summary by Froeb et al., “Cost-Benefit Analysis Without the Benefits or the Analysis: How Not to Draft Merger Guidelines” available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=4537425 and another summary by Werden, “Two Bridges Too Far: First Take on the Draft Merger Guide- lines”, CPI Column, September 5, 2023, available at https://www.pymnts.com/cpi_posts/two-bridges- too-far-first-take-on-the-draft-merger-guidelines.
Scholarship Abstract Some argue that large platforms, such as Alphabet/Google, Amazon, Apple, Facebook and Microsoft (or GAFAM), are unusual in their number, pace and concentration of . . .
Some argue that large platforms, such as Alphabet/Google, Amazon, Apple, Facebook and Microsoft (or GAFAM), are unusual in their number, pace and concentration of technology mergers, with the potential to harm market competition. Using a unique taxonomy developed by S&P Global Market Intelligence, we conduct a descriptive study of GAFAM’s M&A activities, comparing them to those of other top acquirers from 2010 to 2020. We find: (i) GAFAM completed more tech acquisitions per firm than other groups of top acquirers, and acquired younger and more consumer-facing firms on average. (ii) The top 25 private equity firms outpaced GAFAM in tech acquisitions per firm since 2018. (iii) GAFAM acquisitions are less concentrated across tech categories than other top acquirer groups, due, in part, to an “acquire-adjacent-and-then-expand” strategy. (iv) Over time, more and more GAFAM and other top acquirers acquire in the same categories. (v) No evidence suggesting that a GAFAM acquisition in a category, compared to similar categories without GAFAM acquisitions, is correlated with a slowdown in the number of new acquirers acquiring in that category. Overall, we find that technology acquisitions do not shield GAFAM from potential competition that may arise from other GAFAM members or other firms that acquire in the same categories.
Scholarship Abstract We examine how public firms listed in North American stock exchanges acquire technology companies during 2010–2020. Combining data from Standard and Poor’s (S&P), Refinitiv, . . .
We examine how public firms listed in North American stock exchanges acquire technology companies during 2010–2020. Combining data from Standard and Poor’s (S&P), Refinitiv, Compustat, and Center for Research in Security Prices, and utilizing a unique S&P taxonomy that classifies tech mergers and acquisitions (M&As) by tech categories and business verticals, we show that 13.1% of public firms engage in any tech M&A in the S&P data, while only 6.75% of public firms make any (tech or nontech) M&A in Refinitiv. In both data sets, the acquisitions are widespread across sectors of the economy, but tech acquirers in the S&P data are on average younger, more investment efficient, and more likely to engage in international acquisitions than general acquirers in Refinitiv. Within the S&P data, deals in each M&A-active tech category tend to be led by acquirers from a specific sector; the majority of target companies in tech M&As fall outside the acquirer’s core area of business; and firms are, in part, driven to acquire tech companies because they face increased competition in their core areas.
