Federal Trade Commission and Merger - Research Paper Example

?Running head: federal trade commission and merger - arbitron, nielsen 20th November Introduction In order to face off their competitors in the current business environment that is characterized by stiff competition, various firms within the same industry or in different industry have taken initiatives to form a merger. Besides forming a strong marketing team and increasing the shareholders’ returns, firms merge in order to absorb their competitors thus acquiring a larger market segment. During the merging process, it is imperative to ensure that all legal procedures by the companies involved are adopted. This implies that for any merger to be acceptable it must comply with the business laws as provided by the government. For example, in US, Federal Trade Commission (FTC) is an agency that has been established by the government to ensure unfair business practices are avoided. Additionally, FTC is responsible for prevention of fraudulent business strategies that would jeopardize not only the shareholders investments but also the consumer’s money. Another notable function of FTC is to create a competitive business atmosphere. In this way, the negativities of monopoly as well as price discriminative policies are addressed. During the merging and acquisition processes, it is imperative for managers and directors to engage all the stakeholders that include the shareholders, creditors, auditors and other investors. This paper aims at discussing the merger between Arbitron, and Nielsen companies and the implications of FTC on the merger. Nielsen Holdings is an American based firm that deals in providing its local and global clients with information regarding the behaviors of their consumers in the market. With its headquarters based in New York and in Netherlands, the company operates in more than 100 countries in various regions world wide. In this regard, the company enjoys wide market segment that places it at a competitive position. Key people who oversee the operations of the company includes David Calhoun and Rick Kash, the CEO and the vice chair respectively. Other individuals in the management team include Brian West, Steve Hasker, Mary Liz, Mitchell Habib and Itzhak Fisher among others. One of the notable aspects that have contributed to the success of the company is the establishment of quality services that are highly demanded by companies that are focused at facing off the various challenges in the local and international markets. The three key products by Nielsen include provision of consumer information, market measurement as well as consumer research. Nielsen has been involved in a number of business strategies that have not only positive impact on its capital base but also in its marketing strategies. These include strategic alliances, mergers as well as acquisitions. Some of the companies that the company has either acquired or formed a merger with include WPP Group, VNU, Buzzmetrics, Blackstone Group, IAG Research, The Cambridge Group and more recently Arbitron among others1. Arbitron is a US based firm with its headquarters in Columbia, Maryland. Having been founded in 1949 by Jim Seiler, the company original services included collection of television ratings that it adopted during the research process2. Just like Nielsen Holdings, Arbitron is engaged in a number of mergers immediately after it was established. Some of the notable companies that the company has merged with include Cooper, Clay and Coffin. In a deal that was aimed at making the company more competitive in the global market, Arbitron merged with Nielsen Holdings in 2012 resulting into change of names to Nielsen Audio. Key person who oversee the acquisition process was Sean Creamer, the company chief executive officer. Summary about the merger between Arbitron and Nielsen Arbitron and Nielsen Companies have for a long time been used by firms to provide with information regarding the consumption of their brands. Based on the need for two firms to improve their market share and increase their profitability, Arbitron and Nielsen strategic move was to form a merger. In 2012, Nielsen announced its intention to acquire Arbitron. The acquisition was valued at $1.26 billion. According to the deal, Nielsen is under obligation to license its technology to another firm for eight years. Even though this led to the change of ownership for Arbitron Company, it was a beneficial move in that it resulted to improved performance in the market an aspect that resulted to an increase in the shareholders returns. On its part, Nielsen was focused at increasing the number of hours that it will use to monitor the consumer consumption by use of television and other electronics devices3. In this way, the company relationship with its customers will be strong thus generating sustainable benefits for the two companies. According to David Calhoun, the Nielsen CEO, the acquisition of Arbitron was a vital strategy that will ensure that clients who are mostly advertisers will have ample opportunities to choose the most effective medium of advertisement. In its effort to compensate the Arbitron shareholders, Nielsen agreed to pay $48 a share. After consultation with its investors and the shareholders, Arbitron agreed leading to the announcement of the intention to merge in December 2012. Despite its improved technology, Nielsen goal was to benefit from the Portable People Meter, a modern device that was innovated by Arbitron. Portable People Meter would allow the companies to store expansive records of the radio signals that the consumers come into contact with during their day to day activities. Thus Nielsen will effectively meet the need of ever growing number of consumers who heavily rely on scientific data collection methods during their marketing research. Causes and effects of the merge between Arbitron and Nielsen One of the major causes of the merger between the two companies was to improve on their services by use of the modern technology. With its wide market segment and the need to provide excellent services to the consumers, Nielsen was focused at adopting new technology that was initiated by Arbitron thus leading to provision of effective products. Additionally, the Nielsen was focused at increasing its revenue from the $5.612 billion that was attained in 2012 to a higher level. In this way, the company would significantly increase its level of profitability. The need to diversify its market portfolio and expansion of the assets was another key cause of the merger. It is notable to note that based on the need to expand its customer base by entering emerging markets, Nielsen needed more assets and distribution channels in its operations. Thus, by acquiring Arbitron, the company objective was to streamline its processes in the global market. Based on the increased use of technology in the current advertising industry, companies within the measuring industry have embarked on creating a strong positive product-consumer relationship by creating strong brands. Additionally, firms especially those in the global market are focused at providing quality brands that is equal to the value of their customers money. In this regard, companies have taken the initiative to employ extensive marketing research before and after launching a product in the markets. Thus the need to provide adequate data that is as a result of extensive research triggered the need for Nielsen to acquire Arbitron. This is based on the fact that Arbitron has been noted to be a technology savvy. The company will thus provide an ample technology opportunity that will ensure the two companies emulate effective methods of data collection and analyses. A key effect of the Arbitron and Nielsen merger was the rebranding of the Nielsen Company into Nielsen Audio. Through the rebranding process, the companies were able to increase customer awareness an aspect that increased the sales for the two companies. In its effort to ensure that the deal was beneficial and that complies with business laws, the FTC directed that Nielsen divest some of its assets. As a result of the Nielsen compliance the merger was approved. The use of modern data collection devices such as Portable People Meter, significantly improved the service delivery of Nielsen. This implies that out of the merger there was an exchange of knowledge that is key in ensuring development of any industry. Before the two companies merged, they were under the leadership of experienced managers and technical team. After the merger, strong management and distribution teams were formed thus resulting to effective distribution of services in all the regions that the companies operated. Despite the legal procedure that was pioneered by the individuals who were against the merger, the two companies went a head and completed the deal after it was approved by the FTC. On the side of the investors, this created trustworthiness since the acquirer was not hesitant to compensate the investors from the acquired company. The FTC’s argument about the merger As mentioned earlier, Federal Trade Commission major responsibility is to ensure that all the companies engaged in acquisition or merger comply with the laid laws. In this way, ethics is upheld while at the same time the rights and interests of the investors are not jeopardized. FTC initial argument was that due to the merger, the competition within the market research industry would reduce thus creating a scenario of low rate of innovation an aspect that would slow down economy. Based on the fact that before Nielsen and Arbitron merged they were main competitors in the market research and measurement industry, FTC argued that the merger would lead to a monopoly thus resulting to increase in prices for the measurement services. According to Edith Ramirez, the FTC chairwoman, the merger between the two companies was likely to destroy the competition that is vital for the development of businesses in the world. One of the conditions from the FTC was that Nelsen should allow a third party to invest in the company’s technologies and software in order to allow cross-platform measurement. This implied that for the merger to be approved, a buyer of the Arbitron’s assets must be approved by the FTC. Another notable argument by the FTC was based on the need to ensure that Nelsen was competitive in the market. As one of the conditions raised by Federal Trade Commission on the merger, Nelsen should provide technical assistance to the Arbitron and to ensure that the employees from the acquired firm were hired by the new company without any obstacles4. As the result of the compliance by Nelsen Company, FTC cleared the two companies thus resulting to the merger of the two companies in September 2013. The public and organizations opinion about the merger The merger between Arbitron and Nielsen attracted the attention of both the public and the organizations that were aimed at buying the Arbitron’s assets. On its part, comScore, a US based company that was focusing at buying the assets undertook a review process to evaluate the FTC stand on the merger5. According to the firm, FTC effectively took the necessary step to ensure that competition within the measuring industry was not affected. In this regard, ComScore Company agreed to comply with the divestiture process as outlined by the Federal Trade Commission. According to the company’s management team, comScore would undertake all the necessary measures to ensure that challenges facing the measurements industry were adequately handled. In their efforts to hinder the merger that was seen by public as unhealthy, some investors emulated a legal process to cease the merger process. One of the key investors who were against the acquisition of Arbitron by Arbitron was Joseph Pace. According to him, the merging process was not organized and the don't ask-don't waive provisions that were adopted in the process were not benefiting the shareholders6. He also argued that Arbitron did not make public disclosures about all the financial aspects of the deal. However, the Delaware Court ruled that the two companies were fair in revealing the essential in formation and that the merge was according to the law. Other players in the advertisement industry were also against the merger. This was based on the fact that the two companies were the only ones who had the capacity to provide quality services to the advertisers7. And through combining them it will not only result to lack of innovation and high prices but also it will be difficult for other firms to enter the industry. It is essential to note that even though monopoly situation is beneficial to a company in terms of making high profits, it is detrimental for the consumers. One of the key aspects that led to the public and investors outcry on the merger between Arbitron and Nielsen was that it other investors who would be ready to offer prices lower than the market prices would not that opportunity. As a result, the consumers will be highly exploited at the expense of the large profits that the new company will make. On their part, the employees were afraid in the sense that they would loose their jobs thus resulting to loss of income leading to increased level of poverty. It is vital to note that apart from the flexible benefits such as training, holidays and gifts, employees are motivated by job security. At its initial stages, the merger did not clearly indicate the measures that the acquiring company would take to avoid loss of jobs. Thus, calling for the intervention of FTC that indicated safeguarding the rights of the Arbitron employees and rehiring them as one of the conditions before approving the merge. Conclusion Based on the above discussion, it is clear that for a merger or an acquisition to effectively take place, it is fundamental for the managers of the merging parties to comply with the legal requirements as outlined by law. FTC, a US agency regulates the merging process in order to avoid frauds and other unethical practices that would affect business environment. The merger between Arbitron and Nielsen was successful after the acquirer entered into an agreement with FTC .This was in relations to hiring of the Arbitron, sale of Arbitron asserts to a company approved by FTC and offering of technical support to the acquired company. It is worth noting that for any industry to develop and offer growth opportunities there must be competition among the firms. The fear of eliminating competition was one of the aspects that made majority of the investors and advertising firms as well as the public to disagree with the merger. Despite the legal cases that were instituted by some investors such as Joseph Pace, the deal between the two companies was closed in 2013. To avoid lack of trust and uphold transparency, it is of my opinion that companies should ensure adequate disclosure on matters relating to acquisition and merger to the shareholders as well as to the public. References Charles, K. 2008. The Business Privacy Law Handbook. New York: Artech House. Jason, N and Dennis K. VNU Gets Board Approval for Sale To Group of Private-Equity Firms. The Wall Street Journal, March 8, 2006. Kaplan, W. Nielsen to Try New Audience-Survey Device. The New York Times, October 16, 1985. Pace v. Arbitron Inc. et al., case number 8243 in the Delaware Court of Chancery. Plunket, W. 2008. Plunkett's Advertising and Branding Industry Almanac 2008: Advertising and Branding Industry Market Research, Statistics, Trends and Leading Companies. New York: Plunkett Research Ltd. The case is in the Matter of Nielsen Holdings N.V. and Arbitron Inc., file No. 131-0058, before the Federal Trade Commission. Vega, T. 2012. ESPN, Aided by Arbitron and comScore, to Follow the Audience Wherever It Goes. New York Times. Retrieved 20 November 2013. Read More