Non-competition covenants in acquisition deals

• Type: Article in International Scientific Journal
• Date: 2016

Authors

Alcino Azevedo (Author) Other; Paulo Jorge Pereira (Author) FEP; Artur Rodrigues (Author) Other

Journal

Title: Economics Letters

Vol. 143

Pages: 61-65

ISSN: 0165-1765

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 2 Citations

ISI Web of Science

Scopus - 2 Citations

Other information

Authenticus ID: P-00K-CMH

DOI: 10.1016/j.econlet.2016.03.025

Abstract (EN): We study the changes in the consumers' and producers' surplus associated with acquisition deals where there is a non-competition covenant that forbids the seller from re-entering the market over a given time period. We find that these acquisition deals can lead to significant negative (positive) changes in the producers' (consumers') surplus, which decrease significantly with the time period of the covenant. We also show that the effect of the time period of the covenant on the welfare change can be positive or negative. It depends largely on the market conditions, such as the profit uncertainty and growth rate. © 2016 Elsevier B.V.

Language: English

Type (Professor's evaluation): Scientific