Best Mergers

This presentation introduces new methods for identifying optimal mergers and restructuring opportunities across an entire sector rather than evaluating mergers one pair at a time. The approach combines: • Data Envelopment Analysis (DEA) to estimate merger gains from scale and scope economies • Mixed-Integer Linear Programming (MILP) to identify the best set of non-overlapping mergers • Set-packing optimization to handle large merger-search problems efficiently • Stability and incentive constraints to ensure that proposed mergers are voluntarily acceptable to participating firms The methods are illustrated using data from 39 Danish electricity distribution companies (DSOs), showing how structural inefficiencies can be quantified and how optimal consolidation plans can be designed under geographic and incentive constraints. Topics covered: Structural efficiency and sector restructuring Estimation of merger gains One-step and multistep optimization approaches Stable mergers and coalition formation Geographic constraints and sensitivity analysis Applications to regulated industries Presented by: Peter Bogetoft Department of Economics Copenhagen Business School Keywords: DEA, mergers, optimization, MILP, efficiency analysis, industrial organization, regulation, electricity distribution, utilities, sector restructuring, stable matching, cooperative game theory.