Market power effects after domestic Russian merger and acquisition deals

Abstract

This research develops an approach to analysis of market power effects after domestic Russian mergers and acquisitions (M&A) and tests potential success factors for increasing market power after M&A. The sample is based on the Mergermarket database and includes 171 domestic Russian deals closed between January 2006 and September 2015. This paper makes two primary contributions to the literature. First, this paper is related to the recent research that investigates M&A in emerging markets. Our paper is unique in that we study domestic Russian M&A based on long-term firm accounting data. This approach captures private companies and small deals that make up the majority of the Russian M&A market. The second contribution is the evaluation of market power effects after M&A both for the entire Russian M&A market and for the separate industries. The analysis shows that domestic Russian deals do not lead to significant increase in market power. Only 49% of the deals are successful and, on average, they lead to 2,6% increase in EBIT margin. The most successful industry is wholesale and retail where 68% of the deals are successful. This article may be useful for company management to estimate value of prospective M&A deals and for academic researchers interested in analysis of emerging markets M&As.