| Mergers & Acquisitions Primer |
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Entry Analysis
Under the
Guidelines
, a merger is unlikely to create or enhance market power if entry into the relevant market is relatively easy. To ascertain whether entry into the market is "easy," the enforcement agencies will analyze the timeliness, likelihood, and sufficiency of entry.
Timeliness
. Under the
Guidelines
, entry into a market is timely only when it can be achieved within two years from the initial planning to significant market impact on price.
Likelihood
. Entry into the market is likely under the
Guidelines
only if the new entrant would be profitable under premerger prices. This premerger standard is used because following a merger, a firm with enhanced market share could temporarily reduce its prices to discourage other entrants, or if there were new entrants into the market, make it more difficult for the new firm to achieve market share. Thus, if the potential entrant is able to acquire market share and profits within the two-year period, entry is likely.
Sufficiency of Entry
. Entry is considered sufficient under the
Guidelines
where the potential entrant possesses adequate knowledge of the market and financial resources to deter or counteract any supra competitive pricing by a merged firm.
Copyright 1999
Robert W. Doyle, Jr.
