External Growth and Competition Legislation | A Mega Merger is Blocked!

Mergers and takeovers are rarely blocked by competiton regulators. So this is a good example to help explain why not every strategy of external growth will get beyond the first stage!

As the BBC reports here, a US judge has blocked the $2.2bn planned merger of Penguin Random House, the world’s largest book publisher, with rival Simon & Schuster.

The reason? That the deal would “substantially” harm competition “in the book publishing market.

The key stakeholders being considered by the judge were book authors, who are usually paid an "advance" of royalties to write the book.

The US government argued that the merger would result in fewer publishing businesses like Penguin being in competition with each other, which consequently would lead to lower advances for authors.

In the US book publishing market, the largest five publishers control 90% of the market.

If the merger had been allowed to go ahead, the combined business of Penguin Random House and Simon & Schuster were estimated to be about to have 49% of the market for publishing the most popular "blockbuster" new books.