Non-competition covenants in acquisition deals

Azevedo, Alcino, Pereira, Paulo J. and Rodrigues, Artur (2016). Non-competition covenants in acquisition deals. Economics Letters, 143 , pp. 61-65.

Abstract

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 cquisition 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.

Publication DOI: https://doi.org/10.1016/j.econlet.2016.03.025
Divisions: Aston Business School > Economics finance & entrepreneurship
Aston Business School
Additional Information: © 2016, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: non-competition covenants,acquisitions,real options
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Related URLs: https://www.sci ... 0970?via%3Dihub (Publisher URL)
Published Date: 2016-06
Authors: Azevedo, Alcino ( 0000-0002-4751-6085)
Pereira, Paulo J.
Rodrigues, Artur

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