The Startup Hunger Games: Do Market Titans Eliminate Future Rivals?
- IJLLR Journal
- 4 hours ago
- 2 min read
Meher Srivastava, National Law Institute University, Bhopal
Sanika Lambhate, National Law Institute University, Bhopal
UNDERSTANDING KILLER AQUISITIONS
The phenomenon of ‘Killer Acquisition’ is an ultimate strategic flex of a dominant firm, essentially acting as a corporate prenup designed to protect a monopoly. It is an intentional manoeuvre where a powerful incumbent firm buys a nascent competitor, usually a tiny start- up with zero revenue but extreme potential. The aim of the incumbent firm is simply to terminate future competition by killing the product or the project by the nascent firm.
This concept is based on the risk that the incumbent firm may lose future revenue to an innovative product developed by a nascent firm, which could succeed and disrupt the incumbent’s market share or buying and continuing to develop or operate the product despite the risk of cannibalising its own sales. Therefore, the defining features of killer acquisitions is the it is horizontal in nature, and that the outcome is that product development is terminated.
The transition from theoretical risk to demonstrable harm, the concept was empirically validated in the pharmaceutical sector. In the pharmaceutical sector, approximately 6% of acquisitions qualify as killer acquisitions, amounting to roughly 50 such deals each year. The study further found that transactions valued about 5% below the United States Federal Trade Commission (FTC) turnover threshold were 11.3% more likely to be killer acquisitions than those valued 5% above the threshold. This suggests that these mergers were not subjected to scrutiny by the investigating authorities as they fell below the threshold.
The digital sector also portrays the prevalence of killer acquisitions, the Silicon colossi - Amazon, Apple, Facebook, Google, and Microsoft made around 400 acquisitions globally.
