Experts and analysts are predicting a flurry of merger and acquisition (M&A) activity for what is often considered “old line” industries—the telecommunications (telecom) and media industries. Companies are increasingly recognizing the value of scale. Media companies recognize that bigger is better when negotiating with distributors; telecom companies recognize that same value when negotiating with content providers. Additional reasons behind this flurry can be tied back to technological disruption and the morphing of companies historically holding a traditional space in the market that are now shifting their offerings to leverage technology to meet consumer needs in more innovative ways:

  • Sony Play Station is not just for gaming anymore; they’re now competing with cable and media companies for membership
  • Both AT&T and Comcast, typically considered telecom companies, have entered the media space
  • Netflix, which historically offered access to content from other sources, is now creating their own content
  • Amazon, which used to sell books, and has grown to represent significant competition to Walmart, a behemoth in the retail industry, is now also entering the media distribution space through their Echo product (which can also control “smart homes”) and the creation of original content

Consumers no longer need televisions or cable subscriptions to access content— they can do it through their phones, iPads and personal assistants like Amazon’s Alexa, Apple’s Siri, Google’s Home or Sony’s Play Station 4. Traditional cable companies are at risk of being consumed, or made obsolete, by the Verizons of the world that are now able to provide subscribers with access to television programming historically only available through cable subscriptions. Hardware manufacturers—like Motorola and Samsung— are also finding themselves at risk in an Internet of Things (IoT) environment where new kinds of devices will allow consumers to access information, or manage their homes and office environments, in new ways.

How are organizations responding to this disruption? Increasingly, through mergers and acquisitions.

M&A offers faster path to innovation (sometimes)

Where mergers and acquisitions were once primarily about expanding market share, today’s M&A activity in the telecom and media industries is increasingly about gaining access to new technology that can help avoid the impacts of disruptive innovation.

If any telecommunication or media company that merges with or acquires others wishes to fend off the onslaught of competition, they will need to find ways to leverage technology in new and innovative ways. If they don’t, they risk becoming obsolete like Blockbuster and Kodak—two large organizations that famously failed to address the impacts of pending technological disruption.

Today’s companies in the telecom and media space find themselves in a position of having to make “buy or build” decisions—balancing the cost of developing competencies internally vs. partnering with, or purchasing, other firms that have those competencies already. Many are finding that the fastest path to innovation is M&A. Altice and Cablevision, AT&T and DirecTV, and Verizon and Yahoo represent recent examples.

But it’s a path that can be fraught with risk—significant risk. Unfortunately, many companies find that the path to a successful merger or acquisition is a rocky one; many fail. In fact, according to the Harvard Business Review, 70 to 90 percent of M&A deals fail.1

Pre-merger: Three “Big Buckets” of risk

Once two, or more, companies agree to merge or be acquired, there is no shortage of challenges that span the M&A lifecycle. Three critical areas to M&A success, and yet ones that often don’t receive the necessary focus, are: anti-trust issues, human capital issues and contract review issues. Anti-trust issues, in particular, which represent both a high risk to derail a merger and significant cost whether, or not, the merger even goes through, are all too often not given the attention deserved.

In addition, fully understanding these potential risks and taking steps to ensure they are minimized or mitigated, up front, can lead to a more efficient, and effective merger. After all, we know that mergers and acquisitions don’t tend to fall apart because of the strategy behind them—they tend to fall apart because of failure to execute which often arises from the need to address unidentified risks, or opportunities, pre-merger.

Anti-trust review

One of the first steps an organization must go through when planning to merge is to go through a Hart-Scott-Rodino (HSR) review which entails submitting documents to the Federal Trade Commission (FTC) and Department of Justice (DOJ) and, then, responding to a second request—providing additional information to satisfy any anti-trust issues identified through their initial filing. This can be a significant undertaking. Add to this the cost of gathering, synthesizing and submitting requested information. Often, this becomes a very people-intensive process meaning that costs can ramp up quickly.

Another risk at this stage is of being accused of “gun-jumping”—moving too quickly to begin integrating and consolidating the organizations once the merger agreement has been signed. This is a “must not do” and can lead to significant fines—as much as $40,654/day. Qualcomm/Flarion learned this painful lesson and were imposed a $1.8 million DOJ penalty for moving too quickly to bring the organizations together.

Finally, from an anti-trust perspective, organizations can anticipate that their initial HSR filing will lead to what are called “second requests”—follow-up requests from the FTC and/ or DOJ for additional information related to plans to address any identified potential antitrust issues. The Sherman Act may come into play, for instance, if the parties involved are competitors which may raise restraint of trade concerns. During this process, companies may have to divest assets in certain markets to satisfy anti-trust issues, for instance.

The cost of responding to these requests can run into $10’s of millions of dollars—with no guarantee that the merger or acquisition will be approved.

While it’s not unlikely, especially for very large organizations, to turn to their in-house counsel to assist in the anti-trust review process, other options can be leveraged for faster, more reliable results and less people-intensive costs. Applying a technology solution can help not only in the initial filing process, but also in responding to any second requests received. Technology can provide capabilities to accelerate data collection, analysis and reporting. For instance:

  • Technology tools can be used to collect and mine unstructured data that would otherwise be difficult, time-consuming and expensive to review
  • Software can be leveraged to help identity patterns in data which can be especially useful when needing to analyze large volumes of data
  • Data visualization tools can be used to highlight key areas that require action, ensuring the right focus
  • Data modeling and sampling can be used to evaluate trends and identify opportunities and risks
  • Machine learning can help to improve results over time

With the large amounts of data that are common in these M&A activities, it’s simply not possible—or even advisable—to attempt to conduct analyses without the aid of powerful technology options that can ensure accuracy and reliability

Human capital considerations

Let’s state the obvious: when two or more companies come together there will obviously be duplicated positions that must be consolidated or eliminated. While small, privately held organizations will largely be able to pursue merger talks without alerting employees to the potential impact on their jobs, large, publicly held organizations don’t have this ability. From the point that a company’s intent to merge or acquire is formally announced to shareholders, employees will be alerted as well—everyone from senior leaders down to the front-line staff will be at risk of deciding to seek new opportunities rather than wait to see whether their jobs, and livelihoods, will be impacted.

There are implications as well for productivity and engagement. Employees who are distracted by the potential impact of a merger will be less productive and focused. Management at all levels will need to identify their “must retain” staff members and communicate with them—quickly—to avoid an exodus of key talent.

Communication management is critical here—ensuring that the right messages get to the right people at the right time. That involves more than a mass email distributed to all employees. From a best practice standpoint, effective pre- (and post-) merger communications involves carefully timed and targeted messages designed to both give employees ready access to information (via online portals, smartphones, tablets, social media and mobile devices) that they can access for self-service, as well as to identify and target key employee segments that need different kinds of messages to meet their needs—e.g. managers vs. line staff, in-house staff, vs. remote staff, new employees vs. employees reaching retirement age, etc. These communications can be cost-effectively created and managed through automated communication systems.

Aside from concerns related to the potential loss of key staff, organizations need to address issues related to how they will successfully integrate and manage the new organization. What will the organizational structure look like? How do the companies’ pay and benefit practice align, or not? What will be done to close the gaps? For those employees whose jobs and positions are eliminated, what will the severance implications—and costs—be?

Beyond structure, culture will come into play; there are likely to be cultural differences between the organizations—how will these differences be managed, and merged? A misalignment between cultures is at the root of many failed mergers.

Then there are the potential “metastasizing issues.” Could a review of the HR department’s communications unearth any underlying harassment issues that have not been addressed, or resolved? Could a review of the PR/communication department’s communications unearth any underlying corporate reputation issues that are emerging? These issues may impact the purchase price—and future success—of the merger.

Finally, the new organization needs to be prepared to manage change.

At this phase companies should be focused on how to “prevent the horrible surprise.” As with addressing anti-trust issues, effectively focusing on the potential human capital impacts of M&A can be time, and labor intensive. Or, these activities can be expedited through the strategic use of technology.

Contract review and due diligence

Every organization operates under a myriad of contracts and agreements: with customers, with vendors—and with employees.

As with staffing issues, when companies merge, there is likely to be duplication between some of these contracts. But eliminating, or consolidating, duplicate contracts isn’t a simple matter. There may be contractual restrictions that prohibit making changes until some later date to avoid penalties.

Contracts with clients can be equally vexing—and expensive. Suppose, for instance, that one of the companies has a client that represents six percent of their business with a contract that is up for renewal six months after the merger? That’s a potential risk. Or, suppose one company’s customer payment terms are based on 30 days, while another is based on 60, 90 or 120 days? What are the implications for cash flow?

Identifying these risks represents a significant undertaking. Imagine reading through the fine print of the massive number of contracts that two, or more, very large organizations are obligated to? Imagine further the potential for overlooking some key element of a contract that can put the newly formed organization at significant risk.

Automating contract review and due diligence can save organizations significant amounts of time, and money, and improve the likelihood that all potential risks and opportunities have been identified. Technology can be leveraged to do more, with less— less people and less money.

Post-merger issues

After the merger, there are still many issues that may impact the ultimate success of the newly formed organization. Post-merger challenges include: managing human capital, managing change, focusing on creating efficient operations through digital transformation and the reduction of platform redundancies, and a continued focus on risk management and legal compliance.

Despite the due diligence that takes place over the long period of time from merger agreement to finalizing the deal, many of these arrangements eventually fall apart— not because of a poor strategy but because of failed execution.

As is commonly the case, many organizations fail to effectively optimize on all the potential synergies that exist across the combined organization. Effective execution requires organizational agility—creating an organization that can cost-effectively focus on new markets, new technologies and new opportunities. As during the pre-merger phase there are a myriad of issues that companies must be focused on. Here we’ll focus on two: managing human capital and continued anti-trust compliance.

Managing human capital

The excitement, promise and optimism of Day 1, pre-merger, can quickly fade when the operational realities of the newly combined organization take hold. Despite all of the due diligence, review and planning that occurs prior to Day 1, people and culture tend to foil more M&A deals than transactional fundamentals. Culture clashes are the norm and should be anticipated.

It’s important for merged organizations to have a team in place with a well-formulated strategic communications strategy using change enablers like onsite action teams, integration mentors and coaches, local office training and teambuilding activities and consistent and timely leadership outreach via channels including videos, webinars, town hall meetings, intranets, etc. The more frequent the communication the better. In addition, opportunities for two-way communication is important, providing staff with a means of seeking information and answers to questions. This is especially critical for those workers who may otherwise feel out of the loop—field staff, remote workers, part-timers and contract staff. A clear plan that leverages technology to reach all staff, wherever they are, and that provides for two-way communication and engagement can go a long way toward supporting a smooth transition with minimal impact on productivity and engagement.

While it should be obvious to all that the incorporation of each separate entity’s culture, processes, technology, etc., will mean that some things will be left behind, dealing with the reality of change and, in some cases, loss, can create stress for leaders and staff.

Transparency, openness and prompt responses can help to alleviate concerns and keep employees focused and productive. Building trust can help to get everyone on board with what is changing, what is not, and moving forward to create the new organization.

It’s common for some level of fatigue to set in after the merger has been completed and the merged companies move forward in an attempt to reach “business as usual” status. During this phase, leaders must stay visible and communicate regularly.

Defining the desired integration end point with leadership alignment on clear goals and objectives can ensure clear line of sight for all.

That endpoint should be communicated as a series of steps, creating the right level of urgency as well as an opportunity to celebrate quick wins as well as milestone achievements. These initial processes may not be perfect but, by maintaining an “integrate first, optimize later” approach, which includes manageable timeframes, the organization can demonstrate visible accomplishments which keeping staff committed and energized.

It is critical post-merger that leaders remain focused on their ability to capitalize on new market channels and customer segments, brand power, diversification of products and services and the intrinsic innovation and value that each company involved in the merger had to offer.

Cost containment will be an important part of the integration strategy, but companies must be able to grow the top line while also realizing operational efficiencies. In the process, people and culture need to remain top of mind with communication and transparency leading the way to long-term M&A success.

Continuing anti-trust compliance

Anti-trust issues don’t go away after the merger is finalized. In fact, companies are likely to face added scrutiny under the new administration as recent Department of Justice (DOJ) actions foretell.

In October, Bloomberg reported on the DOJ’s suit against technology firm ParkerHannifin Corp., post-merger, quoting Patricia Brink, director of civil enforcement in the antitrust division: “The overall message has to be that the [Hart-Scott-Rodino filing requirement] is a notification process, but it is not in any way jurisdictional in our ability to bring a lawsuit.” She goes on to say: “We really can’t ignore what’s an anticompetitive merger because it already had gotten HSR clearance.”

It’s important for merged organizations to continue to monitor for anti-trust issues post-merger on a periodic basis; this could potentially be done quarterly as part of their normal SEC filings.

In addition, organizations need to continue to monitor the potential areas of vulnerability that may have been identified during the pre-merger due diligence process, using analytics to ensure that any identified risks are remediated and monitored. Post-merger it is important from a legal and compliance standpoint to address any potential civil suits proactively.

The stakes are high, as are the risks, but changing technology and changing market expectations mean that, in the telecom and media space, most companies will be impacted in some way by M&A activity.


Opportunities in M&A for telecom and media companies are growing and multiple players are already exploring, or in the process of exploring, the merger or acquisition of other organizations as they seek to position themselves to grow market share and achieve economies of scale through vertical and horizontal integration.

It’s important that, throughout the merger process, both pre- and post-Day 1, organizations consider the various areas of risk and opportunity, and how proven processes, a capable M&A team and enabling technology can help organizations successfully execute the M&A strategy while minimizing risk and capitalizing on opportunities.

Conduent provides clients with proven M&A methodologies and processes, experienced and trusted advisors, and industry leading technologies that cut through the M&A complexities, saving you time and money—and providing you with peace of mind throughout the M&A lifecycle.


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