Question

(20 points) In 2014, Comcast corporation announced their intention to acquire Time Warner Cable. The two companies argued that the merger would increase their overall scale, allowing the company to become more competitive, improve customer service quality, and quicken innovation. The companies also argued that the deal would increase competition in the United States' cable television and internet markets, as they planned to divest subscribers to Charter Communications to regulate the market share of their combined operation. In 2016, Marriott International announces its plan to acquire Starwood Hotel & Resorts, which would make them the largest hotel chain in the market which now offers the most comprehensive portfolio of brands including leading lifestyle brands, a significant global footprint, and leadership in the luxury and select-service tiers as well as the convention and resort segment.

Explain the similarities and differences between the two merger proposals above and why the US court approved of one deal (Marriott and Starwood in the hotel and lodging industry) and was opposed to the other(Time Warner and Comcast in the media and internet broadband services industry). Do you agree or disagree with the court’s decision? (10 points)

Answer 1

As per the case study, during the year of 2014, Comcast Corporation announced their intention to acquire Time Warner Cable. The two companies argued that the merger would increase their overall scale, allowing the company to become more competitive, improve customer service quality and quicken innovation. And it also argued that the deal would increase competition in the ‘United States’ cable television and internet markets, as they planned to divest subscribers to Charter Communications to regulate the market share of their combined operation.

Later on in 2016, Mariott International announces its plan to acquire Starwood Hotel & Resorts, which would make them the largest hotel chain in the market which now offers the most comprehensive portfolio of brands including leading lifestyle brands, a significant global footprint, and leadership in the luxury and select-service tiers as well as the convention and resort segment.

In both the above scenarios, the similarity is that there is a converging of two different entities for making use of the resourcefulness or strength they both possess. It also is apparent that in both the cases this merger will help them become the largest player’s in the respective markets i.e. the leaders of the market. It will also help them utilize the synergy for the best of the entities and serving the customers.

But when we have a detailed reading, it is also apparent there actually is a difference between the merging or converging that takes place in both the cases.

Before moving further, let’s get an understanding of what Acquisition actually is.

When there are unfriendly deals and the company or entity that is being acquired in reality does not wish to be purchased are Acquisitions. Here there will be a hostile environment rather than a friendly one as in Merger. This is because, here the acquiring company will be more powerful one and the acquired one might be doing this due to the adverse environment or situation they are currently in.

Here the name of the acquired company might be changed or overpowered by the acquired company’s name.

For example; when Down Chemicals acquired the Union Carbide, Dow Chemical actually abandoned the name of Union Carbide due to an internationally known scandal in which it was implicated.

Now coming back to the cases stipulated above, despite of being acquisition what makes them different has to be seen into.

In Mariott International and Starwood Hotel & Resorts case, though the acquisition was to conquer the market globally or regionally putting its competitor’s at the edge, there was no naked display of this intention and they were rather portraying the more wide offers they can make to the market by using the power of this synergy.

While, Comcast Corporation and Time Warner Cable who was going for the merger, was putting forth a clue regarding an unhealthy competition strategy that they were planning ahead of the merger, which was to divest the subscribers of an equal peer i.e. Charter Communications. This was also a reason for the oppose that widely arose from individuals, groups and corporations arguing that it would reduce competition through consolidation of the cable industry and lead to increase in the cost of the services provided. It was also argued that this acquisition will give Comcast Corporation an unprecedented level of control over the United States internet and television industries.

Now moving forward and when we try to view both this acquisitions from a different angle, it is more clear that though not displayed by Mariott and Starwood but which was made apparent by Comcast and Time Warner, the reduction in the scope of competition, increase in the cost of services or providing any of the player an unprecedented level of control over the market is more like same in both the cases despite of being in different industries.

But again what makes them different is that, in case of Mariott and Starwood, the competition was spread among the players of almost 100 countries or more than 1000’s of markets wide all over the world. And the choice was over 5,500 hotels which was huge.

Now in case of Comcast and Time Warner, the same was within the market of the United States which was limited when compare to that of the other. This would result in the fall of the industry players and bring in monopoly kind of control.

Hence it is clear from the above explanation that why the US Court approved of the Mariott and Starwood deal and opposed the Time Warner and Comcast merger.

And citing to the explanations above I would like to finish the answer by saying that I Agree to the Court’s decision.