America's imminent merger mania

The smartest insight and analysis, from all perspectives, rounded up from around the web:

"Let there be deals," said Elizabeth Winkler at The Wall Street Journal. That's what corporate executives across the country heard last week when Judge Richard Leon gave the go-ahead for AT&T's blockbuster $85 billion acquisition of Time Warner. The judge systematically rejected the government's antitrust arguments against the union of the telecom giant and media behemoth, and "didn't impose so much as a single constraint on the merger." His decision "lifted a legal cloud that had been hanging over" other major media deals, and CEOs plainly got the message: Within a day, Comcast launched a bidding war for 21st Century Fox, stepping in with an all-cash $65 billion offer in the hope of derailing Disney's stock-based $52.4 billion bid for the entertainment conglomerate. (Disney later upped its offer to $71.3 billion.) The merger frenzy will extend far past media, said Paul La Monica at CNN. Companies are armed with stockpiles of cash, thanks to historically high markets, and "many smaller firms are growing their sales and profits more rapidly," making them attractive takeover candidates. Corporate mergers around the globe — in health care, food, utilities, tech, and transport — have already surged at a record pace this year, with more than $2 trillion in deals unveiled. "If this keeps up, merger activity should easily pass the all-time annual record of $4.7 trillion in deals set in 2015."

The best explanation for the latest merger mania is that companies "have decided that their best strategy for raising profits involves getting bigger," said David Leonhardt at The New York Times. They aren't wrong: "Since the modern merger era began in the 1980s, corporate profits have surged." The larger corporate giants grow, the better equipped they are to confront foreign competitors, leverage new technology to their advantage, and influence government policy. But I'm not sure we appreciate how much the balance in the U.S. economy has shifted to megacompanies. In 1989, firms with fewer than 50 workers employed about one-third of Americans — millions more than companies with at least 10,000 employees. Today, that's reversed: Companies with at least 10,000 workers employ more people than companies with fewer than 50 workers. Big Business is winning, and "the situation will get worse before it gets better, partly because of the AT&T ruling."

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"The new guessing game" from Wall Street to Hollywood is which companies will be snapped up next, said Matt Egan and Danielle Wiener-Bronner at CNN. The media landscape will continue to consolidate in a bid to "survive against Netflix, Amazon, and Facebook." And there will be plenty more so-called vertical mergers, à la the AT&T–Time Warner deal, outside of media. These are unions of companies that don't compete directly but are complementary, as in CVS's recent $69 billion play for Aetna and Cigna's $67 billion bid for Express Scripts. I'd be surprised if any deep-pocketed Silicon Valley firms go on buying sprees, however, said Shira Ovide at Bloomberg. Rumors have swirled for years that Apple, Facebook, or Amazon might snap up a film studio or entertainment firm in order to further monopolize people's time and attention. But they haven't done it yet, and Netflix has proven that "you don't need to acquire an entertainment company to become an entertainment powerhouse." For now, at least, I think tech giants are going to "stand on the sidelines of this desperate reshuffling that they caused."