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TitleNon-competition covenants in acquisition deals
Author(s)Azevedo, Alcino
Pereira, Paulo J.
Rodrigues, Artur
KeywordsNon-competition covenants;
Real options
Issue dateJun-2016
JournalEconomics Letters
Abstract(s)We study the changes in the consumers’ and producers’ surplus associated with acquisition deals where there is a non-competition covenant that forbids the seller from re-entering the market over a given time period. We find that these acquisition deals can lead to significant negative (positive) changes in the producers’ (consumers’) surplus, which decrease significantly with the time period of the covenant. We also show that the effect of the time period of the covenant on the welfare change can be positive or negative. It depends largely on the market conditions, such as the profit uncertainty and growth rate.
DescriptionJEL classification: G34; D81
Publisher version
AccessRestricted access (UMinho)
Appears in Collections:NIPE - Artigos em Revistas de Circulação Internacional com Arbitragem Científica

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