Failing Company Discriminant Analysis

Mergers of competitors often violate antitrust laws. One of the few possible defenses to a merger prosecution is the Failing Company Doctrine. This defense can be invoked when one of two merging companies is failing and the failing company receives no offer to merge from a company with which a merger would have been legal. The Failing Company Model was constructed to aid in assessing the probability of business failure, where failure is defined in accordance with the meaning courts have imputed to it in the context of this antitrust defense. Predictive accuracy of the Failing Company Model was evaluated by discriminant analysis. This article reports the results of the discriminant analysis. Detailed discussion of the Failing Company Model and a proposed guide for decisions under the Failing Company Doctrine can be found elsewhere.'