Research on Prices and Timing of Sequential Merger

This paper develops a model for the prices and timing of sequential horizontal mergers in a dynamic economic environment with stochastic industrial shock and uncertainties on synergies implement. It is predicted that uncertainty on preliminary merger undervalues the synergic gain of subsequent merger. Furthermore, the merger prices associate with the synergy implement of each other. Even if synergic gain of preliminary merger is negative, as long as the fraction of subsequent merger shared between buyer and preliminary firm is so positive that can make up for the loss in preliminary phase, sequential merger should take place. We also prove that the optimal timing of sequential merger will be advanced with synergies increasing and with the buyerpsilas bargaining power enhancing.