A prediction model of merger & acquisitions in the US telecommunications industry — A case study of a recent M&A in wireless communications sector

Abstract

The “1997 Merger Guidelines” articulates the analytical framework that Department of Justice (DoJ) and Federal Trade Commission (FTC) use to review merger and acquisition cases. To better apply the guidelines to the M&A cases in telecommunication industry, the authorities and merging companies in telecommunications industry have a need to translate the provisions of the general guidelines to the specific situation of the telecom sector. Based on the telecommunication M&A cases between 1996 and 2009, this paper develops a model to assess the predictability of prospective M&A outcome from the DoJ/FTC review process. The model could be a good leading indicator for the potential merging companies and the decision makers in M&A reviews. The model while integrates the M&A criteria based on the M&A circumstances in telecommunication industry, it does not eliminate the need for exercise of judgment from the evaluation of mergers under the antitrust laws. A recent Merger case between Cisco and Starent Networks is evaluated as a case study.