In March of 2011, AT&T announced that it would buy T-Mobile USA. In August of that year, the Department of Justice (“DOJ”) filed a suit to stop the purchase. After four months of obstacles and setbacks, AT&T announced that it was withdrawing its bid. The DOJ had won this time. The DOJ does not, however, always succeed when challenging high profile mergers. In 2003, Oracle initiated its tender offer for PeopleSoft, and the DOJ filed suit to halt the purchase. Oracle was not dissuaded, went to trial with the DOJ, and the DOJ lost.
As these two mergers indicate, the outcomes of cases concerning Section 7 of the Clayton Act are no longer predictable.6 If the interpretation of Section 7 was predictable, AT&T would not have pursued T-Mobile, in which the deal fell apart and AT&T ended up losing a $4 billion breakup fee. Obviously it is too late for AT&T to avoid the mistakes it made as it attempted to buy T-Mobile. There are lessons to be learned. A comparison of AT&T’s unsuccessful purchase of T- Mobile with Oracle’s successful purchase of PeopleSoft reveals the elements of a successful approach to large-scale mergers. By comparing these two deals, legal counsel to companies that are pursuing, or are contemplating pursuing, a large- scale acquisition can learn the current, successful elements to approach growth by acquisition.
This article sets forth the lessons to be learned from the comparison of these two deals. Part I sets out an explanation of Section 7 case law, and Part II describes the outcomes of the Oracle trial and the AT&T failed purchase. Part III describes the lessons that can be learned from this comparison. Based on these lessons, Part IV makes recommendations for companies seeking to grow and avoid an AT&T outcome.