The Upside of a Merger Mess

It’s been more than 500 days since AT&T announced an $85 billion acquisition of Time Warner, and the firm probably won’t know for many more days or weeks whether its deal, currently opposed by the US government, will legally go through. That waiting period could tax the patience of most executives, and the likely lengthy trial deciding the deal’s outcome, which began this week, won’t help. 

But experts say there may be some benefit to all that time in limbo: a chance to reevaluate and maximize the potential merger’s value. “I would think that the expectations of Wall Street, for whatever synergies the companies are able to achieve for the merger, will be greater given the amount of time they will have had to plan,” says Henry Topping, a senior client partner in the Sports and Entertainment practice at Korn Ferry.

If AT&T and Time Warner lose in court, the move could raise questions about the future of so-called vertical mergers, or mergers between two companies that operate at different levels of an industry’s supply chain. But if they win, experts say the prolonged time between the merger’s announcement and its completion could wind up being a blessing, with more time to iron out business structures, employee salaries, reporting lines, and other issues that frequently trouble big acquisitions.

That’s important, experts say. Since the AT&T-Time Warner deal was first announced way back in October 2016, business leaders and journalists have feared that it’s very similar to the AOL-Time Warner deal, regarded as one of the worst mergers in corporate history. Some of the flaws of that deal had to do with there being a massive sense of time pressure and many untested assumptions. There was also a clear cultural rift between the two companies that ultimately led to the unraveling of their promised synergies. The extra time can let AT&T and Time Warner figure out how to mesh cultures, says Denise Klecka, a Korn Ferry senior client partner. "They are learning how each other works, and learning what they will each need to change to work together," she says.

In many ways, what happens with AT&T and Time Warner could impact Disney and Fox, CBS and Viacom, and other possible mergers in the media industry. The sector has seen plenty of consolidation recently: As technology has changed and big tech firms such as Amazon and Netflix continue to dominate, media companies have been pressured to find ways to create lucrative content and get it distributed more efficiently than ever. “It’s about content, content, content. The people who own the content control it all,” says Scott Coleman, senior partner at Korn Ferry’s Global Technology and CEO Succession practices. 

That scenario has put pressure on the leaders of AT&T and Time Warner to get it right. “I think the anticipation of whether or not it’s going to happen focuses the mind quite a bit," Topping says. “The pressure is on the executive teams of these two companies to make sure that, having fought the good fight and won, they’re ready to go.”