To Combine or Not? Consolidating Horizontal Acquisitions in Multi-sided Market

Abstract

When a parent company acquires a horizontal competitor on the same side of a multi-sided market, it must decide whether to fully integrate the acquired platform or keep it as a separate brand. We study this in the context of Uber's acquisition of Postmates, using novel consumer receipt data that tracks food delivery spending. Employing an Age-Period-Cohort (APC) decomposition, we isolate the merger's effect on consumer spending while controlling for lifecycle and cohort effects. We find that Postmates users sharply reduced their spending on the platform after the merger, but spending shifted not only to UberEats, but also to competitors like DoorDash and Grubhub. Consumers who used multiple platforms and had low pre-merger activity on Postmates were more 'sticky', showing little change. Comparing our APC results with a standard Difference-in-Differences (DiD) design, we find the DiD underestimates the merger's total impact by missing market-wide effects. Our findings suggest that in multi-sided markets, keeping acquired platforms separate can be beneficial; dissolving them may push demand to competitors, and some sticky multihoming users may not shift spending at all.