Merger Synergies along the Supply Chain Gennaro Bernile  , Evgeny Lyandres y November 2010 Abstract This paper aims to assess the strategic e/ects of mergers and acquisitions on merging rms product market rivals, customers, and suppliers. In particular, we provide the rst analysis of how merger synergies propagate through the supply chain by utilizing a novel dataset of insiders pro- jections of merger-related operating e¢ciencies. Based on a simple oligopolistic competition model, we show theoretically that omitting synergies from the empirical analysis of the anticompetitive e/ects of mergers along the supply chain can lead to biased inferences. Indeed, our empirical tests indicate that both merger-related changes in industry competition and improvements in operat- ing e¢ciency are important determinants of the wealth of rivals, customers, and suppliers around horizontal merger announcements. Specically, while product market rivals tend to benet from re- duced competition and su/er from merging rms prospected e¢ciency improvements, the opposite is true for merging rms likely customers and suppliers. Finally, we extend the existing literature by providing a rst analysis of the wealth e/ects of vertical mergers along the supply chain. Although this sample is arguably small, the observed relation between the changes in wealth of acquirers rivals, customers, and suppliers in vertical mergers and the projected operating e¢ciencies is sig- nicant, and varies with the direction of the integration and the size of the rms a/ected. Overall, the evidence supports the notion that mergers have strategic repercussions that propagate through the supply chain as a result of changes in industry-level competition and rm-level competitiveness. Keywords: horizontal mergers, synergy, market power, vertical mergers JEL Classication Numbers: G34, L13.  School of Business, University of Miami, Coral Gables, FL 33124, email: gbernile@exchange.sba.miami.edu, tel: (305) 284-6690. y School of Management, Boston University, Boston, MA 02445, email: lyandres@bu.edu, tel: (617) 358-2279.