M&A Strategies for Industry Entry: Firm Sizes and Market Concentration

ABSTRACT This study examines the optimal M&A entry strategy in structurally asymmetric markets, focusing on how market concentration affects the choice between serial and direct M&A strategies. We find that firms prefer to initially merge with a medium‐sized firm that is less risky but has sufficient market share in highly concentrated markets. Conversely, it is necessary to merge with a large firm, even if it exposes the firm to greater risk in low‐concentration markets. For example, SoftBank's serial acquisitions in the concentrated Japanese mobile market and Yahoo!'s direct acquisition of ZOZO in the fragmented fashion e‐commerce market support our theoretical findings.