The story of 2018 for media and telecommunications companies was simple: The world is changing, and now is the time to consolidate. AT&T closed its deal for Time Warner. Sprint and T-Mobile agreed to merge. Disney bought Fox, and Comcast bought Sky. The total cost of the four deals alone was more than $200 billion.
Don’t expect the same from 2019 or 2020, according to Wall Street bankers and M&A lawyers.
Executives at AT&T, Discovery and other companies have publicly acknowledged that Netflix and other technology companies are threatening traditional media companies, forcing consolidation. But even though that trend will continue, we may not see another transformational year until 2021, said John Harrison, EY’s global leader for the media and entertainment.
“I think there could be a pause,” Harrison said. “A series of transactions have happened that will need massive integration. There’s a little bit of stress on capital structures that will need to be worked down. And you probably have to have more regulatory clarity to know what’s in the art of possible. There’s a lot of stuff in flight. It may take time.”
There are at least four reasons why we should expect to see a megadeal slowdown.
Remember when Donald Trump talked about how he would block AT&T’s $85 billion deal for Time Warner in his 2016 campaign? Putting aside the fact that a president can’t actually block an acquisition — that falls to his Department of Justice antitrust division, which is theoretically independent — other companies don’t want to be campaign fodder for Trump and a slew of potential Democratic candidates in 2020.
At least two Wall Street advisory firms are specifically planning to hire media and telecommunications bankers with a focus on 2021, according to people familiar with the matter. Part of the rationale is that companies won’t want their proposed deals to get caught in the political crossfire of the next presidential election.
“Big, complicated, potentially problematic antitrust deals are more dangerous to do right around the time of a presidential election,” said Logan Breed, a partner at Hogan Lovells who specializes in antitrust merger reviews.
The last presidential election year, 2016, was a banner year for M&A, but it was also a huge year for deal terminations. As The New York