I have been noodling over the Meta/Instagram FTC case and the government's argument here. In short, the FTC wants to unwind a deal that was completed 12 years ago because it has been "too successful." The FTC argues that Meta (Facebook) "overpaid" for Instagram... which is ironic and counter-factual, because definitionally Meta wildly underpaid. (Meta's $1B purchase price may have seemed high at the time, but it is arguably one of the greatest and most profitable deals of all time). Google similarly bought YouTube in 2006 for $1.65B, and recent estimates are that it is worth $450B on a stand alone basis today. Did Google overpay as well? (Google likewise is in the FTC cross-hairs). It seems a bit "upside-down" to have regulatory bodies retroactively going after the most successful companies for doing the most successful deals, decades after such deals were allowed to close. As for the argument that the deal was done because the competition's product was superior: Once again, this is literally the definition of virtually ALL M&A because M&A is always a "build vs buy" decision If nothing else, it ignores the "big bets" that fail while seeking to penalize those that were "home runs." Thoughts? #deals #mergersandacquisitions #transactionadvisory
Principal at EY, Strategy and Transactions
19hIf the argument is that the FTC missed key indications at the time of the Instagram and WhatsApp acquisitions and that applying today’s merger guidelines ex ante would have prevented approval, that alone wouldn’t justify undoing the deals now (setting aside intent). The allegation is that Meta acquired Instagram and WhatsApp not for synergy or growth, but specifically to eliminate potential competitors. This intent is a key part of proving anticompetitive behavior. However, that’s not the FTC’s only argument. The real question is whether Meta currently engages in anticompetitive practices and whether those practices, stemming from these acquisitions, have led to the alleged monopoly in the personal social networking market. The FTC alleges that Meta’s intent at the time of the acquisitions was to suppress competition, and the resulting dominance harms consumers and stifles innovation. The proposed remedy, similar to the case against Google, is to break up Meta by divesting Instagram and WhatsApp.