Dear Readers,
What is a killer acquisition? The term was first employed in the pharmaceutical sector to describe acquisitions by an incumbent of a competitor that threatened to launch a blockbuster drug that would undermine its own products, with a view to shutting it down. In recent times, the term has broadened to cover other industries, notably the tech sector, where companies allegedly acquire startups to acquire their technology, either to quell a nascent threat, or to integrate it to their own offerings, further entrenching their dominance.
In one sense, the theory of harm associated with such acquisitions is intuitive: an acquisition designed to kill innovation would naturally raise antitrust suspicions. But isolating true “killer” acquisitions, and dealing with them within the existing merger control and antitrust framework is far from straightforward.
The “prey” is often a start-up, with insufficient revenues or market share to trip existing merger notification thresholds. As such, many “killer” acquisitions may escape merger control scrutiny entirely, raising the questions of whether such acquisitions should be examined after the fact, or whether merger notification rules should be modified.
Moreover, the acquirer’s intentions are not always easy to divine. Quite often, acquisitions of startups are so-called “acqui-hires,” motivated by the need to hire highly skilled employees. Indeed, large companies acquiring startups can be pro-competitive, as synergies with the scale and expertise enjoyed by incumbents are necessary for startups to scale up their offerings. Many startups in fact deliberately set out to be acquired (rather than to float an IPO, for example) in order to recoup their investments, and to bring their technologies to as many consumers as possible.
The contributors to this Chronicle draw on their experience from around the world to address these and the other complex issues raised by the theory of “killer acquisitions.” Hopefully it will prove a valuable resource to enforcers and practitioners as they continue to address this thorny issue.
As always, thank you to our great panel of authors.
Sincerely,
CPI Team
