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The Lina Khan Effect: Mega-Mergers "Plummeted in 2021"
Leadership does make a difference as Wall Street aims for lots of small transactions instead of a few mega-mergers.
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With Lina Khan at the Federal Trade Commission and Jonathan Kanter at the Antitrust Division, dealmakers are taking note and the marketplace is changing. Here’s the FT:
Mega takeovers in the US — deals north of $25bn or $50bn — plummeted in 2021, according to data from Refinitiv, as companies particularly in pharma and tech have shied away from taking regulatory risks.
At the same time, smaller mergers are accelerating.
Dealmaking hit an all-time high in 2021, with more than $5tn worth of transactions generated predominantly by private equity firms, which tend to do smaller deals that avoid regulatory attention.
Private equity is really driven by Fed policy, and it can be trickier to stop those kinds of mergers with antitrust law. Khan has stated that private equity is a priority, but slowing that wave is probably impossible without changes to statute and/or monetary policy.
It’s not just the merger wave that is being reshaped by the new aggressive antitrust enforcement. News just broke that the FTC is now investigating Amazon’s cloud services arm, which is its most profitable division.
One issue the FTC could look at is whether Amazon has an incentive to discriminate against software companies that sell their products to clients of AWS, while at the same time competing with Amazon. The fear is that Amazon could punish the companies that work with other cloud providers and favor those that it works with exclusively.
I’m curious to see what the FTC comes up with on AWS. More than curious, actually. And I suspect that Khan’s aggressive posture will continue to reinforce the attitude of state enforcers like Karl Racine. Stay tuned…