Antitrust Law Is Big Tech’s M&A Kryptonite – or Is It? | PRO Insight

In my last two weekly columns, I discussed M&A in the worlds of media and entertainment (the first focused on Big Tech buyers, the second focused on boutique studio sellers). Consider this the third in my M&A trilogy. Here I focus on perhaps the single biggest threat to all media and entertainment M&A — i.e., the Department of Justice (DOJ) and its increasing heightened antitrust scrutiny of proposed deals.

It’s that scrutiny — and even the perceived threat or expectation of that scrutiny — that is chilling the mega-media M&A air this fall season. After all, Big Tech’s problem certainly isn’t money. Rather, it’s the widely held belief that those Silicon Valley behemoths are too big, too controlling, too powerful and simply too destructive to smaller players and overall competition (and the consumers who benefit from a more vibrant playing field). Antitrust is the one seemingly sure stop to the otherwise unstoppable.

In an era of increasing schism in the U.S., our divided politics have united on at least one thing — an ever-closer focus on Big Tech’s sheer scale, together with its frequently unbridled and unfiltered algorithmically-driven dollar motivations. Those forces — which studies show both drive teen depression and foment social stress and unrest — first placed Meta/Facebook’s Mark Zuckerberg at the top of DOJ’s “Most Wanted” list.

And now, according to investment banker Erik Hodge of The Raine Group (a guest on my recent M&A panel at TheWrap’s TheGrill event), “Almost every deal you see [Meta] try to do gets stuck with review. It’s pretty remarkable how much scrutiny that they have on them.” Case in point: Just last week, Meta was essentially forced to sell Giphy by U.K. regulators, demonstrating that antitrust scrutiny doesn’t end at U.S. borders. In fact, U.S. regulators had previously approved the $400 million acquisition.

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But make no mistake, it’s not just Meta/Facebook and its increasingly confined-and-isolated-in-the-metaverse leader Mark Zuckerberg that face the DOJ’s music. The specter of antitrust hangs over essentially any deal proposed by Big Tech. And it doesn’t stop there. That specter looms large for all players in the media and entertainment ecosystem that boast any real size and scale. The antitrust threat “is very real,” according to Moelis & Co. banker Carlos Jimenez (another guest on my panel). “When CAA did buy ICM, they went through the ringer in terms of just the antitrust review process,” he said. This, in turn, said Jimenez, fuels a fundamental question in all boardrooms today: “Buyers and sellers are thinking, do we want to go fight the Department of Justice to go get a smaller transaction done?”

Andy Howard of private equity firm Shamrock Capital, a major player in M&E M&A, bemoaned that he “failed twice” when two of his deals faced antitrust scrutiny. Howard was referring to the scrapped deal to merge FanDuel/DraftKings sports betting firms and his earlier ScreenVision/National CineMedia deal. “It’s awful,” Howard told us at TheGrill. “It’s a massive disruption to your business… so I do think it’s in the mindset of operators and strategics right now thinking about how far I press [M&A]. Is it really worthwhile?”

Antitrust’s chilling effect freezes both buyers and sellers. “If you’re the one who’s getting acquired,” Howard said, “it’s a big leap that you’re going to have to make because you will be under scrutiny for a period of time. And that timeline is unknown.” In other words, it’s the kind of Hollywood spotlight no seller wants. A dead-end deal that deeply disrupts company dynamics and overall operations.

Antitrust’s “chill” impacts all sectors of M&E. Emily Wang, a games specialist at investment banking firm LionTree, pointed out that the Microsoft’s pending $70 billion mega-acquisition of Activision now finds itself directly in the DOJ’s cross hairs and may not survive. “Activision is trading at a discounted acquisition price, which indicates that the market is not sure that the deal will go through,“ she told me at TheGrill. Microsoft’s nearly $2 trillion dollar market cap is pretty scary and menacing stuff, after all. Among other things, “Regulators are discerning how much data is too much data for Microsoft to have,” Wang said. And while Amazon’s $8.5 billion acquisition of storied Hollywood studio MGM ultimately passed the Feds’ antitrust test, industry insiders like Raine’s Hodge were surprised by the high level of scrutiny the deal received at the time.

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Many of us understandably cheer the Feds’ heightened antitrust focus on Big Tech players who have been left unsupervised for too long (and have seen their valuations skyrocket to multiple trillions at least in part because of it). And it’s quite incredible, really, that politicians from both blue states and red states have climbed on board the antitrust train with such fervor — a fervor that many, including Shamrock’s Howard, believe will not dissipate no matter which party controls Congress after the upcoming midterm elections. Less clear, however, is whether the DOJ’s increasing vigilance will succeed.

But does an actual outright antitrust “win” even really matter? The Feds (not to mention smaller competitors and frequently consumers) “win” when stricter scrutiny simply causes Big Tech to think twice. The mere uncertainty of it all drives real behavioral impact. And financial markets — and the mega-players in it — loathe uncertainty.

That may give an opening for non-Big Tech buyers to swoop in and acquire obvious valuable content and franchise-rich major studio targets like Paramount, Warner Bros. Discovery and potentially even NBCUniversal if Comcast chooses to divest that significantly lower-margin part of its business. Or perhaps Comcast chooses instead to double down on media and merge with Netflix (both have similar market caps). That would give Netflix the franchise content it so desperately needs and instantly create a significantly more well-rounded and formidable non-Big Tech player. In any event, the list of potential non-Big Tech M&A dance partners is longer than you think. Let’s not forget that non-obvious buyer Vivendi — still largely a water-first conglomerate at the time — acquired Universal Studios from liquor-laced Seagram in 2001 (and later sold it to even more unfocused conglomerate, General Electric, after concluding that one part water and one part major Hollywood studio didn’t mix well).

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The only true certainty in these increasingly scrutinized times is that Tim Cook, Satya Nadella, Sundar Pichai, Jeff Bezos and “good old” Mark Zuckerberg aren’t particularly happy about any of it. Neither are investors of companies that otherwise would be ripe for the picking but are now left standing in the cold of M&A’s big chill.

But that doesn’t mean that Big Tech won’t give it the old college try. After all, Apple, Microsoft, Amazon and Google are flush with hundreds of billions of dollars of cash to test the waters. One particularly aspirational, but entirely logical, mega media deal would be for Apple to buy Disney and its magic kingdom of massive evergreen content franchises (Pixar, Marvel, “Star Wars,” The Avengers and our beloved Disney princesses) to accelerate Apple TV+ into hyper-speed. Apple and Disney share the same DNA, after all; Steve Jobs birthed Pixar and later served on Disney’s board.

While many of you may think that’s an antitrust bridge too far, just think about it. The Feds could still claim “victory” by forcing Apple to divest Mickey’s invaluable ESPN piece of cheese, just as Disney divested Fox’s 22 regional sports networks when it acquired Rupert’s world of entertainment assets in 2019. Disney’s The Avengers indeed — franchise gifts that keep on giving.

For those of you interested in learning more, visit Peter’s firm Creative Media at and follow him on Twitter @pcsathy.

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