While State aid measures are known to have the potential to distort competition, many forms of aid are nevertheless permitted where their benefits outweigh such distortions. State aid may be granted through a variety of instruments, some of which may be more distortive than others.This Article examines whether the way in which Covid support is granted, impacts firm outcomes once the GGE is accounted for. We link COVID-19-labelled State aid from the Commission’s State Aid Transparency database to accounting data for large-enterprise beneficiaries across 24 Member States (2020–2023), which results in 28 969 disbursement–firm observations. Using controlled regressions and a staggered, synthetic difference-in-differences design while conditioning on the aid element, we estimate the differential effect of grants versus other instruments. Grants are associated with a marked short-term strengthening of profitability and balance-sheet indicators (mainly profit margins, ROA, solvency indicators, and interest coverage), but these advantages dissipate and do not translate into consistently higher medium-term growth or efficiency relative to the controls, supported through other aid instruments.

The business and strategic management literature shows that dynamic competition depends on firm-level capabilities. Yet, firm-level capabilities do not feature in the variables used in the economic evaluation of mergers. For that reason, integrating capabilities analysis in merger policy is often perceived as a challenge. This paper questions that perception. We examine whether competition agencies already conduct capabilities analyses in merger enforcement, focusing on purchaser approval decisions following divestiture orders. Using a unique dataset of 109 such decisions adopted by the European Commission between 2014 and 2025, we find that the Commission conducts some capability analysis in two-thirds of cases, with thorough examinations occurring in one-third. The intensity of this analysis varies substantially by industry: it is high in pharmaceuticals and chemicals but low or absent in basic metals, electrical equipment, and retail. When capabilities are analyzed, the Commission focuses overwhelmingly on post-merger integration capabilities, with other capabilities like R&D and scaling receiving comparatively less attention. Furthermore, the Commission rarely rejects proposed purchasers on capability grounds. The results hold across the entire relevant period. We discuss the implications for merger remedy design and dynamic competition policy.