Nation & World

Companies hang on judge's word as AT&T ruling looms

Vertical deals used to see little antitrust opposition

FILE PHOTO:    An AT&T logo and communication equipment is shown on a building in downtown Los Angeles, California October 29, 2014.    REUTERS/Mike Blake/File Photo
FILE PHOTO: An AT&T logo and communication equipment is shown on a building in downtown Los Angeles, California October 29, 2014. REUTERS/Mike Blake/File Photo

It’s the $85 billion question that could hold the key to how mega deals are made for years to come.

When U.S. District Judge Richard Leon hands down his decision next week on AT&T’s proposed takeover of Time Warner, the likes of Comcast, Verizon Communications, Cigna and CVS Health will be watching keenly.

Leon’s decision could open the door to Comcast finally making a formal bid for the 21st Century Fox assets it’s been eyeing since last year, make it easier for Verizon to buy a content company, and clear the regulatory path for deals Cigna and CVS already have announced.

All those deals unite companies in different parts of an industry’s supply chain.

For years, these vertical deals typically have received light treatment from antitrust enforcers, unlike the horizontal mergers that bring together direct competitors.

Opposition to the Time Warner acquisition marked an aggressive turn by the Justice Department, but one that could be short-lived if Leon rules against the government.

“If the government loses, we could see more of the larger vertical deals, particularly in heavily regulated industries,” said John Harrison, global head of media and entertainment at advisory firm EY.

“Even if the government wins, the rationale for transactions is going to remain intact and should supersede concerns around regulatory and political outcomes.”

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Companies are trying to buy growth through deals as they scale up to compete at a time when digital change is wreaking havoc on industries as diverse as media, health care, retail and banking, Harrison said.

Those reasons, combined with U.S. tax changes and easy financing conditions, should drive a strong year for deals, he said.

Almost $1 trillion of M&A involving U.S. companies have been announced this year, 55 percent more than during the same period in 2018, according to data compiled by Bloomberg.

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