Rival wealth effects in M&A: rethinking the competitive impact of horizontal transactions in the U.S. TMT sector

Recent antitrust scrutiny in the United States has led to the termination of major mergers in the technology, media, and telecommunications (TMT) sector, reflecting concerns about potential anticompetitive effects. However, sector-agnostic research on announcement effects finds little evidence of such harm from M&A, and TMT-related studies report conflicting results, raising questions about the rationale for aggressive regulatory intervention. This study provides the most comprehensive analysis to date of horizontal M&A effects on rivals within the U.S. TMT sector, analyzing 714 rival announcement reactions across 120 transactions over a period of 20 years. Our findings reveal significant positive shareholder wealth effects for rivals following merger announcements by competitors, suggesting that horizontal consolidation in this sector does not reduce competition. These results resolve previous contradictions in TMT-specific literature and call for a critical reassessment of stringent antitrust enforcement to avoid impeding overall firm value creation. Furthermore, the study challenges the notion that M&A in the TMT sector primarily serves as a competitive strategy for acquiring technological capabilities, offering important implications for both policymakers and industry leaders.