Major M&A Moves To Draw DOJ’s Attention

By Mani
Updated on

Mergers and acquisitions (M&A) among top companies have attracted the attention of the U.S. Department of Justice to prevent those acquisitions which are believed to be detrimental to consumers.

10 industries working towards M&A

Jeffrey Cohen of IBISWorld in the recent research report identified the following 10 industries which are either working toward a merger or acquisition (M&A) or potentially will in the years to come.

M and A Activities - 10 industries

Wireless telecom industry invites DOJ’s attention

The analyst at IBISWorld believes that the industries listed above pose concerns to consumers because they provide goods and services that millions of Americans rely on. He points out that several of these industries have already prompted responses from the DOJ Antitrust Division in 2013.

Cohen points out that the Wireless Telecommunications industry, in which the top four companies generate 94.7% of market share is also experiencing potential mergers.

For instance, Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS), the third and fourth largest companies in the industry, have engaged in talks of merging.

As reported earlier, regulatory concerns however place a shadow on the feasibility of the transaction, given that two years ago, a $39 billion proposal by AT&T Inc. (NYSE:T) was rejected by the DOJ on anti-trust considerations.

During October, it was reported AT&T Inc. is considering putting together a Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD) merger as soon as next year.

IBISWorld analyst points out that DOJ believes that further consolidation would allow the remaining companies to raise prices and reduce the services they offer to customers.

Domestic airlines and chocolate production industries

Jeffrey Cohen of IBISWorld believes the merger in the domestic airlines industry of American Airlines Group Inc (NASDAQ:AAL) and US Airways Group Inc (NYSE:LCC) was a major concern for the DOJ in the initial stages of the merge due to the possibility that the newly merged airline would hike up prices for consumers as well as reduce service to smaller cities. The analyst points out these concerns can potentially present future threats to other players who follow suit.

Turning to the chocolate production industry, Jeffrey Cohen points out Cargill Inc. and Archer Daniels Midland Company (NYSE:ADM) are in the final stages of a deal in which Cargill would buy ADM’s cocoa business. The analyst believes the merger would not affect larger chocolate products such as Hershey and Mars, while it would impact small and medium-size chocolate producers, as the latter would experience more difficulty competing in the chocolate production industry.

IBISWorld analyst also notes a possible major acquisition is on the horizon in the breweries industry with the industry leader Anheuser Busch Inbev SA (ADR) (NYSE:BUD) expressed interest in purchasing the second-largest company in the industry SABMiller plc (ADR) (OTCMKTS:SBMRY) (LON:SAB). The analyst points out that with 76.3% combined market share, DOJ is concerned as AB InBev already controls about half of the US beer market.

Jeffrey Cohen of IBISWorld points out that while other industries in the list cited above have not experienced major M&A activity in 2013, they all present potential for future M&A activity among the top four companies, which may generate antitrust concerns and hence generate demand for legal services.

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