My ad hoc eyeballing of M&A activity and regulation in the European Union long has suggested that politics trumps economics. If the French want one of their national champions (e.g., Alstom) to do a deal, they find a way to make it so - and EU competition rules be damned. Empirical support for this view is provided by this working paper, which finds:
Why do regulatory authorities scrutinize mergers and acquisitions? The authorities themselves claim to be combating monopoly power and protecting consumers, but the last two decades of empirical research has found little supporting evidence for such laudatory motives. An alternative is that M&A regulation is actually designed to protect privileged firms. In this paper, we provide a test of protectionism by studying whether European regulatory intervention is more likely when European firms are harmed by increased competition. Our findings are unambiguous: European regulation is protectionist. The results are robust to a variety of statistical difficulties, including endogeneity between investor valuations and regulatory actions.
