Will Surge in Mergers Bring More Lawsuits?
As President Trump's economic policies take shape, observers predict a surge in mergers this year. It may also bring back merger litigation, which slowed down in the last years of the Obama administration.
Trump's new chairman of the Federal Communications Commission has already promised to "weed whack" many regulations, signaling his intent to follow the president's lead and keep hands off corporate America. With proposed mergers moving forward for giants like Verizon/Yahoo and At&T/Time Warner, this may be the year of the big deal.
It is ironic that media mergers seem to be on the forefront of a trend at the same time Trump has declared war on the media. In any case, cooler heads say media companies simply have to make moves to compete.
"What is driving this is challenges in these businesses," said senior analyst Matthew Harrigan of Wunderlich Securities, according to the LA Times. "There are not a lot of elephants on the savanna, and when one moves, you have to move too."
AT&T is trying to buy Time Warner Inc., which owns several of the nation's biggest television networks and Warner Bros. movie and television studio. The $85.4-billion deal will most likely be approved by Trump's new Justice Department.
Verizon, the largest phone company in the country with more than 114 million wireless customers, is closing in on its offer to buy Yahoo for $4.8 billion and eyeing another deal to acquire Charter Communications, which has more than 17 million customers in big markets such as Los Angeles and New York. No doubt, the FCC will not stand in the way.
While watchdog groups wait to see what happens at the FCC -- such as a rollback of net neutrality rules that favored consumers and other deregulation of media businesses -- lawyers are also preparing for any fall-out from a possible merger mania. At the end of the day, not every shareholder will be happy with the big deals.
Three years ago, practically every merger spawned lawsuits like confetti on a Wall Street parade. Takeover litigation was so commonplace that companies adapted by including jurisdiction limitations in their contracts. That led to easier settlements and easier pay-days for attorneys, but court decisions stemmed the tide for the time being.
With time for lawyers to adjust to the new sheriff in town, there are signs that things are going to change around here. Merging traffic ahead.
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