Business mergers can be incredibly complex. It takes time and great care to negotiate a deal, navigate the legal process and merge businesses properly while reducing risks for both companies.
The stress of a merger between two large companies might only increase if the businesses face a lawsuit, as in the case of the merger of Sprint and T-Mobile.
SPRINT AND T-MOBILE MERGER ON HOLD DUE TO LAWSUIT
Two of the largest telecommunication providers and companies, Sprint and T-Mobile, have been planning a huge merger for a while now. T-Mobile offered to buy Sprint for $26 billion, and the Federal Communications Commission approved the merger in October 2019, stating that:
- It would advance the development of 5G in telecommunications; and
- It would help both companies to better meet consumer needs.
However, ABC News reports that the merger has led to litigation. Several states, including California, are suing to prevent the merger. They state that the merger would decrease the major players in this field from four to three, which they claim could disrupt competition.
Although Baker & Associates is not involved in this case, it is critical for business owners to understand the details, so they can protect their own companies.
ANTITRUST LAWS CAN PLAY A LARGE ROLE IN THE PUSHBACK AGAINST MERGERS
The states suing to stop the merger claim that it would have negative consequences for:
- Prices of the products;
- Workers in both companies; and
- Innovation and competition in this field.
These concerns could be heavily influenced by state and federal antitrust laws, which encourage competition to benefit the public and consumers. Essentially, these states are saying the merger would create a monopoly that would only benefit Sprint and T-Mobile, not the consumers.
WHEN COULD MERGERS LEAD TO LITIGATION?
There are a few common reasons that a business merger could lead to litigation, including:
- When the merger involves a large sum offer;
- If the merger involves large, influential companies;
- When shareholders challenge the merger; or
- If the offer is hostile.
Most mergers will not receive the same national attention as the one between Sprint and T-Mobile has. However, business owners considering a merger must still be aware of the potential risk of litigation and be prepared to manage it to help their merger go smoothly.