Short-Circuited Mergers in the Mass Media: Credible and Incredible Evidence
Patricia T. Whalen Barry R. Litman
Michigan State University
Numerous studies have evaluated the success of mergers based on the financial performance of the combined firm. This chapter examines collapsed mergers -- those that have been publicly announced, but that do not come to fruition. The chapter specifically focuses on the mass media and some unique financial and technological issues that may explain the recent boom in media mergers and the potential for some of them to collapse before completion. The chapter examines five recent, highly publicized media megamergers that ultimately collapsed: Bell Atlantic/ TCI, Southwestern Bell/ Cox Enterprises, Contel/COMSAT, Turner Broadcasting/ NBC, and QVC/CBS. It strives to determine what factors they shared, and if they could be linked to factors that have been shown in other merger studies to contribute to the failure of completed mergers. The chapter concludes that, although changes in the market price of the firms' stock, the presence of large individual shareholders, and firm size and relatedness may be important in the demise of the negotiations, conflicts in corporate culture and personality clashes play the largest role in short-circuiting a media merger.
Newspaper headline writers had a field day on August 1, 1995, when Walt Disney announced its intention to acquire Capital Cities/ABC. Even the stoic Wall Street Journal could not resist such lines as, "All Ears: Disney's Deal for ABC Makes Show Business a Whole New World" ( Landro, Jensen, & King, 1995), when it wrote about the second largest merger in U.S. history, after the $25 billion R. J. Reynolds/Nabisco merger.
One day later, Westinghouse announced its long-awaited $5.4 billion acquisition of CBS, Inc. Immediately following these announcements, the business press began to publish articles that hailed a whole new strategic