Strategic Effects of Horizontal Merger Synergies on Rivals, Customers, and Suppliers

Gennaro BERNILE, Singapore Management University
Evgeny Lyandres, Boston University


We examine the impact of merger-related operating synergies on firms that have output or input market linkages with companies engaged in horizontal mergers. Using a unique dataset of synergies forecasts by management, we find empirical support for a model that produces unambiguous predictions about the effects of merger synergies on firms directly or indirectly linked to merging firms. Our evidence shows for the first time that horizontal merger synergies have strategic effects on the valuation and operating performance of merging firms’ rivals, customers, and suppliers. Overall, our results highlight the importance of inter-firm linkages for firms’ strategies, valuations, and performance.