The Determinants of Horizontal Acquisitions: Evidence from the US Brewing Industry

Abstract

The authors analyze the motives for horzonital mergers by estimating a logit model for the U. S. brewing industry, 1950-83. Their results support D. Dewey's (1961) view that failing firms avoid bankruptcy by selling to successful firms. In the absence of an antitrust constraint, large firms are more likel;y than small firms to acquire another competitor. There is no evidence that firms merge to increase market power or to attain scale e conomies. Although the Justice Department may have been too restrictive in the past, its recent acceptance of an efficiency defense in merger cases seems appropriate in light of our results. Copyright 1988 by Blackwell Publishing Ltd.