Lessons for the Middle Market from the AT&T – Time Warner Deal

396 days. One year and one month. That is how long it’s been since AT&T first announced it would acquire Time Warner for $85 billion on October 22, 2016. As the AT&T – Time Warner deal languishes in the courts, I am again reminded of the advantages that privately held middle market companies have when it comes to deal making. According to a report by City University of London’s Cass Business School, the failure rate for public transactions is triple the rate for private companies.

Fewer Regulatory Hurdles

Unlike large publicly traded firms, which must announce their acquisitions and often face regulatory scrutiny, most middle market companies are not required to report their acquisitions. Antitrust issues are a real concern for large corporations. Even though initially, AT&T and Time Warner did not expect to face major anti-trust issues because the deal was a vertical merger, the U.S. Department of Justice is seeking to block the acquisition. Another recent bust is the T-Mobile and Sprint transaction that was called off after months of talks, in part because of the challenges the companies would face convincing antitrust regulators to approve the deal.

Keep Competitors in the Dark

Not only are private companies able to avoid the scrutiny from regulators, they are also able to avoid the scrutiny from their competitors. The buyer can fly under the radar until the acquisition is closed. In many cases, acquirers choose to never publicly announce deals in order to maintain their competitive advantage and keep their strategy hidden from competitors.  While AT&T is battling for its acquisition of Time Warner, its main rival, Verizon, is free to examine AT&T’s strategy and plan its next course of action.

Although many think of blockbuster deals for M&A, the truth is that many smaller deals are executed successfully by middle market companies every day. While they don’t receive the same attention and press, they do serve their main purpose: helping companies grow strategically.

Photo credit Mike Mozart via Flickr CC BY 2.0

 

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