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Dynamic Competition, Valuation, and Merger Activity

By Harvard Law School Program on Corporate Governance

In the paper, Dynamic Competition, Valuation, and Merger Activity, recently made publicly available on SSRN, we present an estimable model in order to address several questions. First, how do product market dynamics impact firm valuation? Second, how do these dynamics impact M&A activity? Third, what are the value implications for rivals? In the context of a dynamic oligopoly, we provide closed form solutions for the values of n competing firms. These solutions allow us to estimate the values of innovations in fixed costs, profitability and spending effectiveness, explicitly incorporating the current state of the industry and rivals? competitive responses to such investments.

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Full post as published by The Harvard Law School Corporate Governance Blog on October 20, 2010 (boomark / email).