Killer Acquisitions: A Killer Story, But Still Not Much Evidence

In this article, author Selcukhan Ünekbas examines the theory of “killer acquisitions”—where incumbents purchase rivals to eliminate future competition. Originally documented in pharmaceutical markets, where research found 5-7% of mergers might qualify as such acquisitions, the concept has gained significant traction among policymakers, particularly in digital markets despite limited empirical evidence in that sector.

The core concern is that these acquisitions deprive markets of future competition and innovation, especially in monopolized sectors, while potentially creating “kill zones” that deter startup entry. This has spawned related theories including “acquisitions for sleep,” “reverse killer acquisitions,” and “acqui-hires,” though each represents distinct competitive harms. The regulatory response has been substantial, with jurisdictions introducing transaction value thresholds and the EU reinterpreting merger rules to capture deals below traditional turnover thresholds.

However, the theory faces several criticisms. It may conflate competitor numbers with competitive intensity, as innovation pressure isn’t linearly related to firm count. Distinguishing genuine “kills” from normal post-merger integration is methodologically challenging, risking false positives that could block pro-innovation deals.

Additionally, the “kill zone” argument may be overstated—active acquisition markets might actually stimulate entry by offering startups viable exit strategies. Most critically, empirical support remains thin outside pharmaceuticals, with the original 5-7% figure already matching actual intervention rates, while evidence in other industries remains weak…

CONTINUE READING…