Abstract
The article offers a complementary theory for conglomerate mergers. The central argument is that a conglomerate merger may be a vertical merger in disguise. The acquisition of a non-competing firm takes place to achieve control over the target's distribution channel that otherwise could be used by rival entrants. The analysis shows that an entrant with a very differentiated product is accommodated, and an entrant with a close substitute is foreclosed through a conglomerate merger. There also exist equilibria with partial foreclosure where the entrant is forced onto less efficient distribution channels. Incumbent firms' mergers to achieve foreclosure is socially wasteful.
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