About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

70 Fla. L. Rev. 1357 (2018)
Vertical Mergers and Entrepreneurial Exit

handle is hein.journals/uflr70 and id is 1397 raw text is: 


                          D. Daniel Sokol*

   The idea that tech companies should be permitted to acquire nascent
start-ups is under attack from antitrust populists. Yet, this debate on
vertical mergers  has  overlooked  important  empirical contributions
regarding innovation-related mergers  in the strategy literature. This
Article explores the extant empirical strategy literature, which generally
identifies a procompetitive  basis that supports vertical mergers  as
efficiency enhancing. This literature solidifies the current general vertical
merger presumption  that favors a procompetitive vertical merger policy
for  purposes  of  government   merger   enforcement.  However,   the
procompetitive benefit for a presumption of merger  approval for most
vertical mergers does not end with the synthesis of an under-explored
literature. Rather, the broader implications of vertical mergers  and
presumptions of legality have another overlooked implication-a change
of  policy may   dampen   entrepreneurial investment and  innovation.
Entrepreneurial exit is critical to a well-functioning entrepreneurial
ecosystem, as the possibility of entrepreneurial exit via vertical merger is
now  the most usual form of liquidity event/exit for founders and venture
capitalists. Vertical merger policy that would unduly restrict large tech
firms from undertaking  acquisitions in industries as diverse as finance,
pharmaceuticals, medical  devices, technology  hardware, and  internet
platforms would hurt incentives for innovation in the economy by chilling
business  formation in start-ups. Increased difficulty in the exit for
founders and venture capitalists makes investment in such ventures less
likely, since the purpose of such investment is to reap the rewards of
scaling a venture to exit. Thus, a general inference that makes vertical
acquisitions, particularly in tech, more difficult to undertake leads to
direct contravention of antitrust's role in promoting competition and
innovation. This Article explores how entrepreneurial exit for founders
and  venture capitalists is best served by promoting a robust vertical
merger   policy, though   one  that intervenes  in cases  of  specific
anticompetitive harm.


     * UF Foundation Professor of Law and Term Professor of Law, University of Florida
College of Law and Senior Of Counsel, Wilson Sonsini Goodrich and Rosati. I want to thank Bill
Blumenthal and Jon Sallet for their comments.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.

Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most