Antitrust Merger Review Costs and Acquirer Lobbying

Abstract

Documenting the US antitrust review process for M&As in 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 percent in acquirer firm value. We also show that lobbying before deal announcements is associated with more favorable review outcomes. At the same time, 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. Post-announcement lobbying, concurrent with the antitrust review process, increases with adverse review outcomes. Our results highlight the role of political connections in corporate investments when facing regulatory costs and risks.

Keywords: mergers, antitrust, corporate lobbying

JEL Classification: G34, G38