What’s lost when a merger dies?
European antitrust regulators are forcing UPS to scrap its $7 billion deal to acquire TNT Express, a Dutch logistics company.
Ho hum. Just another bump in the road for a couple of big businesses, right? There’s no particular reason the rest of us—including the companies’ present or future customers—should be particularly concerned. At least, that’s the impression you will get from the mainstream news media.
“The collapse is yet another blow for dealmakers,” said an article in the Financial Times of London. And of course, it was a blow to the dealmakers—but is that all it was? Reading articles in the major media, one gets the impression that mergers are simply high-stakes gambles launched by fat cats in distant board rooms—and when their greedy, profit-gouging plans are stymied, they are the only ones who suffer.
Is there another side to these stories? I suspect there is—but when I searched for answers in the mainstream media, I encountered an interesting lack of interest. I checked out reports in five well-respected outlets: Forbes.com, New York Times, Wall Street Journal, BusinessWeek.com, and the Financial Times. All of them, quite naturally, discuss in detail the antitrust parameters underlying the impending decision by Europe’s Commissioner for Competition—market share, competition, changes in stock price, disappointment in the board rooms.
But here’s what interested me most about the articles. Normally, I would expect reporters to ask how a newsworthy event affects their readership’s values. I expect reporters to ask the questions their readership would want answers to. So, for example, if the big story is a ruptured oil pipeline, I would expect news reports to discuss the expected impact on prices at the pump, or the possibility of supply shortages—problems that would have practical impact on their readers.
Here we have, in effect, a ruptured merger. Is it too much to ask that reporters dig into the facts about what, if anything, was lost when the deal died? Most readers of prominent news outlets have some kind of practical stake in shipping, either as businessmen who need parts and products delivered, or as private individuals who send and receive packages. On behalf of such readers, I would expect reporters to care about whether the merged companies could have provided lower prices, faster deliveries, a wider service area, new ideas in logistics—or, if not, what else explains the efforts behind the aborted acquisition.
But I couldn’t find answers to these questions from the five prestigious news outlets I surveyed, because the reporters don’t appear very concerned about asking the questions.
The articles do contain a few tantalizing hints. A stock analyst told Forbes.com that the deal made “strong strategic sense.” A labor union representative was quoted in Business Week as saying a merger was “the best option for TNT” and that “the takeover wasn’t out of luxury.” Coming closest to a description of what will be lost when the UPS-TNT transaction is abandoned, the Wall Street Journal said the “deal would have strengthened UPS’s global reach” and brought “new operational mass to its delivery business outside Asia and the U.S.” But what does that actually mean? Why should a reader who depends on shipping be concerned about “operational mass”? The reporters were apparently not inspired to flex their explanatory muscles on such matters—after all, the deal was dead in the water.
In his classic Economics in One Lesson, Henry Hazlitt observed that evaluating economic policies requires tracing their full consequences—not merely for one group, but for all groups. Economic journalists are uniquely positioned to supply the facts we need to evaluate antitrust policies rationally. It’s worth thinking about what would inspire them to expand the scope and depth of their reportage.
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