AT&T-Time Warner merger unlikely to increase profits, productivity

Aija Leiponen, professor at Cornell University’s Dyson School of Applied Economics and Management who studies the telecommunication industry with a focus on transfer of knowledge, innovation and collaboration between digital firms, says while there is much discussion of the antitrust implications of a potential deal between AT&T and Time Warner, more people should remember the majority of mergers fail to create value that is greater than the sum of the companies operating separately.

Bio: https://dyson.cornell.edu/people/aija-leiponen

 

Leiponen says:

“There is much discussion of the antitrust implications of a potential deal, but I think the most important insights from decades of research on mergers and acquisitions are not being presented.

“The majority of mergers fail to create value that is greater than the sum of the companies operating separately. Mergers and major acquisitions tend to be favored by CEOs of the acquiring company (they get to run and draw salary from a larger company) and shareholders of the target (target stock price may get a boost in the acquisition) but the research evidence suggests there are rarely improvements in productivity or profitability of the merged entity.

“More specifically about the AT&T-Time Warner case, there are many examples of mergers between communication companies and content providers, and none of them have been successful. It just has not worked in closely related industries and I have not seen any sensible arguments for why it might work this time.”

 

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