Documenting the US antitrust review process for M&As in rich detail, we unveil that regulatory costs and risks are significant and that mitigating these risks via lobbying by acquirers may benefit shareholders. Our results show that an adverse antitrust review outcome leads to a decline of 2.8% in acquirer firm value. Further, we show that lobbying before deal announcements is associated with more favorable review outcomes. Finally, higher pre-announcement lobbying is valued by shareholders, especially in horizontal deals and deals with a larger expected change in market concentration, which have higher antitrust concerns. However, this positive value effect of lobbying applies only in firms with strong corporate governance. Our results highlight the role of political connections and lobbying for corporate investments when facing regulatory costs and risks.

Additional Metadata
Keywords Mergers and acquisitions, Antitrust, Corporate lobbying
JEL Mergers; Acquisitions; Restructuring; Corporate Governance (jel G34), Government Policy and Regulation (jel G38)
Persistent URL dx.doi.org/10.1016/j.jcorpfin.2018.05.001, hdl.handle.net/1765/107394
Journal Journal of Corporate Finance
Citation
Fidrmuc, J.P, Roosenboom, P.G.J, & Zhang, Q. (2018). Antitrust merger review costs and acquirer lobbying. Journal of Corporate Finance, 51(August), 72–97. doi:10.1016/j.jcorpfin.2018.05.001