Free AT&T And Direct TV Merger Essay Example

Analysis of a Negotiation

Introduction
Negotiation refers to a method used by different parties reach an amicable solution where they decide to do away with the differences they have. In the process of negotiation, all the parties must reach a certain point of compromise where the solution and agreement reached minimize the possibility of conflict in the future. Negotiation is one of the mechanisms used in the resolution of conflict all over the world. Disagreements emerge because the parties involved in a certain situation have different interest that they seek to safeguard. Such interests may include financial benefits, possession of a property, the rights to use a property, or the interests of other close parties such as children. During negotiation, the parties involved in the conflict aim for the best outcome that leads to the satisfaction of all the parties involved in the conflict (Harvard business review on negotiation and conflict resolution 23). Different mechanisms are used in the process of negotiation. It takes place at all levels including governments, the legal system, industrial disputes, domestic relationships, and business deals. It is important to use the appropriate skill in the process of negotiation to ensure that all the parties benefit from the best possible outcome for all the parties.
In this case, the paper will evaluate the process of negotiation in one of the recent business mergers in the United States. The transaction involved two successful companies in the telecommunication industry in the United States. AT&T entered into a merger with Direct TV in the June 2014 ("AT&T, DirecTV Announce $49 Billion Merger - The Washington Post"). Both of these companies are reputable in the telecommunication industry, and the interest of the stakeholders in the business are paramount in the completion of the transaction.

AT & T announced its intention to acquire Direct TV for a price of 49 billion dollars. The deal would lead to the emergence of a new television and telecom firm that would offer stiff competition to the cable firm. The level of competition expected led to concerns about the interests of the consumers in a case where the new firm may dominate and monopolize the market. Initially, AT &T had offered a smaller price to its business partner but the stakeholders argued that the acquiring company was bound to gain more that the price it was willing to pay. As such, AT &T decided to raise the purchase price to the stated 49 billion dollars to ensure that the transaction was mutually beneficial for both parties ("AT&T, DirecTV Announce $49 Billion Merger - The Washington Post").
It was expected that AT &T would gain an approximate 20 million new subscribers, which would lead to a significant rise in its annual revenue. These were regular clients of the Direct TV, the company it was acquiring, which necessitated the increase in the price for the acquisition. Since the stakeholders of Direct TV, the company being acquired, felt that their initial price was low compared to the benefits, then it was prudent consider their interests. The 49 billion dollar price would make sure that the financial interest of both parties to the transaction are fulfilled. The combination of the two companies would enable the acquiring company to offer fast internet, phone, and paid-up television subscription to all its consumers.
Other successful companies have offered all these packages in the past, and the new firm was heading in the same line of successful business. Given that the scope of the business was increasing, the margin of revenue would also be higher for the acquiring company. For this reason, Direct TV suggested a purchase clause of 51 billion dollars due to the expected revenue margins. However, AT &T argued that they were not certain of the profitability levels before they offered their products to the consumers in the market. As such, both parties agreed that it was reasonable to lower the price stated due to the element of risk in the market. Given that both parties have the interest in the transaction, it was important for Direct TV to consider the fact that AT &T was taking a risk by investing heavily in a business without the certainty of returns. Here, the element of compromise can be perceived as Direct TV considers the concerns AT &T, which facilitates an agreement at a lower price than the price anticipated by the company.
Prior to the agreement for the acquisition, Direct TV held a special meeting with its shareholders to put the decision to vote. Since they are the actual owners of the company, the shareholders have an interest in the transactions undertaken by the management of the company. As such, they must participate in the major decisions made by the management on their behalf. In the meeting, a majority of the shareholders voted and approved of the acquisition for the stated price of 49 billion dollars ("AT&T, DirecTV Announce $49 Billion Merger - The Washington Post"). The management asserted that the acquisition was in the best interest of the shareholders, and it was for a better business platform. In this case, the management convinced the minority of shareholders who did not support the decision because they still had an interest in the firm. The negotiation with the shareholders in the meeting enabled the company to address the fears of the shareholders and facilitate the completion of the transaction.
In the acquisition negotiations, Direct TV agreed that AT &T would acquire 95 percent of its assets and liabilities. It also agreed to the 28.5 dollar per share valuation of the shares on behalf of the shareholders ("AT&T, DirecTV Announce $49 Billion Merger - The Washington Post"). Here, the Direct TV’s management did not oppose the value of the shares because it was higher than the value of the shares of the company before the acquisition. In this context, it is important to note that the parties to a transaction may agree mutually to some of the offers tabled before them. Disagreements do not emerge because they feel that their interests have been satisfied.
Other parties opposed to the merger argued that the deal works against the principle of fair competition in the telecommunication industry. Both companies are reputable in the industry, and they enjoy large profit margins that other companies do not in the same industry. Many legal practitioners argue that the telecommunication industry requires more competition instead of mergers. The perspectives of the professional practitioners compelled the stakeholders of the new merger to convince the custodians of anti-trust law who oversee fair competition in business within the country. The CEO of Direct TV lobbied for the merger before the Commercial and Anti-trust Law Subcommittee for the consideration of the merger.

Conclusion

Negotiations play an important role in the resolution of conflicts in the modern world. It enables the conflict a unanimous agreement that benefits all the people affected by the conflict or transaction. In the course of the negotiation, it is important to consider the opinion and interest of all the parties regardless of their status.

Works Cited

"AT&T, DirecTV Announce $49 Billion Merger - The Washington Post." Washington Post. N.p., n.d. Web. 15 Mar. 2015.
Harvard business review on negotiation and conflict resolution. Boston: Harvard Business School Press, 2000. Print.