The Determinants of Horizontal Acquisitions: Evidence from the US Brewing Industry

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We analyze the motives for horizontal mergers by estimating a logit model for the US brewing industry, 1950-1983. Our results support Dewey's [1961] view that failing firms avoid bankruptcy by selling to successful firms. In the absence of an antitrust constraint, large firms are more likely than small firms to acquire another competitor. There is no evidence that firms merge to increase market power or to attain scale economies. Although the Justice Department may have been too restrictive in the past, its recent acceptance of an efficiency defense in merger cases seems appropriate in light of our results.