Po-Hsuan Hsu, Kai Li, Xing Liu, and Hong Wu
Using a new trademark-based product market competition measure and a novel trademark-merger dataset over the period 1983–2016, we show that companies facing greater product market competition are more likely to be acquirers. We further show that postmerger, compared to their non-acquiring peers, acquirers consolidate their product offerings by discontinuing more existing product lines and developing fewer new product lines. Using a quasi-experiment based on bids withdrawn due to exogenous reasons helps us establish the causal effect of deal completion on product market consolidation. We conclude that acquisitions create product market synergies by cutting overlapping product offerings to achieve cost efficiency.