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AbstractWe provide a theory to identify a new benefit for conglomerate mergers. In this paper, projects are subject to manager‐specific shocks. Bringing projects under the same top management in a conglomerate increases the correlation of shocks. We show that this positive correlation, in contrast to traditional wisdom, enhances a firm's ability to relax financial constraints. This is because common managerial shocks help conglomerates better take advantage of cross‐pledging possibilities. This paper also contributes to the literature by providing one of the first studies to emphasize the role of manager‐specific shocks in shaping a firm's choice to be a conglomerate or standalone.

Conglomerate merger control went out of fashion in the United States and the European Union several decades ago. Both jurisdictions embraced the premise that nonhorizontal mergers should normally be considered benign because exclusionary theories of harm are economically implausible, and nonhorizontal mergers are almost always certain to result in significant efficiency effects that the merged entity can be expected to pass on to consumers. Conglomerate effects analysis subsequently all but disappeared from the enforcement practice. However, the emergence of a handful of powerful digital platforms with vast global ecosystems of interconnected services is currently causing competition agencies a great deal of concern. Their growth has not been entirely internal. Collectively, Alphabet, Meta, Apple, Amazon, and Apple have acquired over eight hundred companies. Many of their targets were innovative start-ups operating in complementary markets. This contribution compares and critically assesses how this development has affected the U.S., EU, and U.K. competition agencies' approach to conglomerate merger control. It finds that, as a reaction to the advent of Big Tech, conglomerate effects analysis has made a significant comeback in EU merger control. While the U.S. and U.K. authorities have not yet intervened against any conglomerate acquisitions in practice, evidence suggests that they are also more open to nonhorizontal theories of harm again.