Full transcript
0:02Hello everyone. Uh welcome to this quick
0:05guide for uh case study one. Um so this
0:09case study is from chapter number nine.
0:12Uh we have finished chapter number nine
0:15in previous uh week. Uh you guys have
0:18done well in um homework assignments. So
0:22I'm expecting that you will be able to
0:25do um really well in this case. Uh this
0:28case is not simple. It's going to take
0:31uh a lot of effort and time and research
0:34for you to uh submit it and earn full
0:37grades. Uh whether your um uh
0:40instructions are that you're going to
0:43work in teams or you're going to work
0:45individually
0:47uh no matter what you will have to
0:49really divide uh the task and time uh so
0:53that uh you can submit this case on
0:55time. So uh uh here there will be
0:59hypothetical
1:00um example uh case that will be given to
1:03you with a lot of guidelines um uh a lot
1:07of sporting news um data and um uh what
1:12you need to deliver what you need to
1:14submit back to me that way is also given
1:17and there is also a rubric attached so
1:20you can really uh see how much effort
1:23you need to put in to get um like 80%
1:27grades, 90% grades, 60% grades and so
1:30on. So let's let's go through this case
1:32quickly. Um so the background and again
1:35it's antitrust uh compliance and
1:38comparative strategy. Uh it's from
1:39chapter number nine. Um the case states
1:43that Techbridge Analytics, a midsize
1:46data analytics firm valued at 2.3
1:48billion uh is uh considering acquiring
1:52um computer vision systems um a comp uh
1:57competitor. So keep in mind these two
1:59are competitors with a market value of
2:02$1.8 billion. A large competitive firm
2:05is going to acquire a small relatively
2:08smaller competitive firm. Both companies
2:10operate in business uh intelligence and
2:13enterprise data analytics market in
2:15United States. Now this is a key point
2:18that this is going to happen in United
2:20States because our antitrust guides uh
2:24DOJ guidelines are very very different
2:26from the other countries. Combined the
2:29two firms would uh control approximately
2:3118% of the market. So this is a key
2:34information that you guys need to keep
2:36in mind and work around. Um the other
2:39competitors are like Tableau now owned
2:42by Salesforce. PowerBI is uh I think
2:45owned by Microsoft. Qink uh and these
2:48companies maintain uh reasonable amount
2:52of uh size of market. Okay. So that's
2:57the main agenda for the case. Other
2:59information that is given to us is uh
3:02industry background. The com the US
3:04enterprise analytics software market we
3:07also call it SAS software as a service
3:11uh is highly competitive with numerous
3:13player ranging from large technology
3:15comp corporations to specialized
3:18boutiques firm some are very large some
3:21are small the top four firms control
3:2435%.
3:26Uh and again this is the key data point.
3:29Um so tech merge specializes in the real
3:34uh in the real time uh analytics for
3:36financial services and computer vision
3:38is for healthcare services. So this is
3:41uh one of the uh one of uh one of the
3:45reasons uh they are you know they this
3:48merger may be allowed um both although
3:52their competitors they provide software
3:54as service uh but the specialization
3:57it's it's specialization it's not like
3:59the entire entire business uh suite so
4:02here uh current market distribution is
4:05that uh sales for is uh uh 12% Tableau
4:10Micros MicrosoftBI PowerBI is 11%
4:13uh Q link 8 SAP 6% Oracle 5 tech bridge
4:186 and computer vision is uh 12% and
4:23others are like around 40%.
4:26So um uh and then what is the rational
4:30for this merger? Um rational is provided
4:34because again there the there's a high
4:36probability DOJ would come in and stop
4:39this merger. So what is the rational we
4:41are we are merging or one firm is
4:44acquiring the other one. Techbridge
4:46management believes that acquiring
4:47computer vision would enable the company
4:49to expand into healthcare. They want to
4:51diversify from financial to healthcare.
4:55um healthcare vertical market achieve
4:57cost synergies estimated at 180 million
5:01annually and what would they do with
5:03these savings in the cost they would
5:05pass on to the customers that's the
5:07that's that's how they're going to make
5:09the case in front of DOJ if this merger
5:12is stopped uh computer vision
5:14shareholders are favorable for this deal
5:17so other key information and this is now
5:20you are given kind of a framework in
5:22which you need to work in 2020 DOJ
5:24challenge
5:26uh Salesforce and Slack merger merger
5:28which quite large merged around $28
5:30billion on competitive grounds. Although
5:33this merger uh merger is later allowed
5:37on a certain conditions in 2022 FTC
5:40filed suit to block Microsoft and
5:42Activision uh acquisition $70 billion
5:46merger. So that is also stopped. Uh just
5:50today uh you know there is a news that
5:53uh uh there was a case uh from different
5:57uh states led by California to stop the
6:01merger uh between uh Paramount and
6:05Warner Brothers. Uh they had a deal um
6:08settlement you can say that mer merger
6:11or acquisition will be allowed as well.
6:14So these are kind of things these are I
6:15mean it is it is routine things when two
6:18companies are about to mer uh to merge
6:20in a way that they their market cap will
6:22become very large like 12% from computer
6:25vision and 6% from tech bridge they will
6:28the DOJ will come in and challenge or
6:31stop this this uh this not only DOJ it
6:34can be FTC it can be any other
6:36department it can be the states who
6:38don't like these kind of mergers
6:41geographical market I already told you
6:43we working in United States or United
6:45States laws will be applied not the EU
6:48or China's other count's laws product
6:51market definition the relevant product
6:52market include all enterprise analytical
6:55softwares where uh customers can
6:58substitute between products vertical
7:00integration tech merge and comput vision
7:03have minimal vertical integration
7:06concerns they ne they neither apply
7:08input to each other nor they compete at
7:10different vertical level mean they are
7:12not suppliers of each whether they are
7:13pure comp competitors. Barriers to
7:16entry. Uh a new firm can enter. Uh the
7:19barriers to entry is like moderate with
7:22development cost mean you you you need
7:24to invest 50 million to 100 million for
7:27comparative entry. Also it's that's not
7:29only one barrier to entry. Another
7:31barrier to entry whether the customers
7:33who are engaged with uh like Salesforce
7:37or Microsoft would they switch to you?
7:39What is the switching cost? So that's
7:41the barrier to entry. So here uh this is
7:43the framework. This is what you need to
7:45work around. Okay? And then once you
7:47have your analysis, you're going to
7:49summarize your analysis into four parts,
7:51four deliverables that I'll show you in
7:53the in a couple of pages. So, uh you'll
7:57go back to chapter nine, note the
7:59slides. Uh you you're going to read the
8:01chapter and this is what you need to
8:03find. There's a SSI, SSN NIP uh SNIP uh
8:08test uh that will um uh really test
8:13whether the when these two funds will
8:15join would they profitably uh profitably
8:20impose a price increase. Uh mean and who
8:23who can profitably impose the price
8:26increase? It is the monopolist. So looks
8:29like if they too much they can become a
8:32monopoly and increase the price. This is
8:34a no no for any acquisition or merger.
8:37If that's the case and you're going to
8:39read it you're going to figure out on
8:41your own by reading from the chapter by
8:43analyzing this case whether this is a
8:45possible and these are your task right.
8:47So task one two and three and then
8:51hyphen dial index um uh this is very
8:54easy calculation. It adds the squares of
8:58each firm's uh market share. Formulas
9:02and examples are given in the chapter.
9:03These are three uh three different
9:07levels uh DOJ will be checking. If let's
9:10say you make your own calculations pre
9:13merger, post merger um and uh you need
9:16to compare the values where the values
9:18are lying and that's how you will see
9:20the likelihood of the challenge. Let's
9:22say pre merge merger you your value is
9:25between 1500 to 2500 but post merger
9:28hyphenal index for this market for this
9:31industry is above 2500 most likely DOJ
9:35will stop or will try to stop this mer
9:38merger. So these are four deliverables
9:40four different type of calculations all
9:42of the data for these calculations are
9:45available. um access uh assesses barrier
9:48to entry. We have talked about this is
9:51like a low to moderate barrier to entry.
9:54Um so you will uh figure out which is
9:57given what is the cap capital
9:59requirement for entry switching cost for
10:01customer. This is not explicitly given
10:05but you can search about it. you can
10:07search hey um if if if let's say the
10:11university would like to switch from
10:12Microsoft to Salesforce uh as a software
10:17provider um generally how much is the qu
10:21switching cost involved right um so
10:24that's these are kind of easy searches
10:26and there are precedents and there are
10:28articles available um all of these four
10:31tasks you will complete um and then um
10:35one of the difficult parts of this um uh
10:39this case study would be this uh
10:42evaluating merger efficiencies. One
10:44thing that I can tell you um um what is
10:49asked here it is actually verifiable if
10:53you really really try there there are um
10:57frameworks available if not in the in
10:59this chapter in this book um maybe
11:03outside the scope of the book. So if you
11:05like to search you can find it out.
11:08However I still I understand that making
11:11these calculation verifiable
11:13calculations
11:15may or may not be possible. So if even
11:17you are not calculating if even you tell
11:20me hey I do not have the data to
11:23complete to verify these cost synergies
11:26I would really like to know what data is
11:28missing. Why do you think you don't have
11:30enough data? So this is the very uh and
11:33only tricky part in this in this um you
11:37know case which is evaluating merger
11:39efficiencies. So there are some tasks
11:41some deliverables. This is the next one
11:44is easy uh analyzing vertical and
11:46horizontal concern. Uh looks like this
11:50topic is slightly touched in the in the
11:52textbook. If it is not then uh feel free
11:55to learn about this, research about it,
11:57provide me some examples and see whether
11:59these two companies whether we will will
12:02have any vertical concerns. We already
12:04saw there were no vertical concerns or
12:06very low vertical concerns. What about
12:08horizontal concerns, right? Would they
12:10merge and uh increase price, restrict
12:14output, price fix and so on. Lastly, um
12:18your recommendation with all of the data
12:21calculations you have made so far,
12:23hyphenal index, you know, uh Sherman
12:26Act, section 7, SSNIP test, um if you
12:30have verified the cost energies, or if
12:33you have not coronal concerns, all of
12:36that, what would you really recommend to
12:39the board of directors, you know, of
12:41either of those companies? What do you
12:43think of antitrust risk rating? high,
12:46medium, low hyphenalis index will be
12:49very uh important here. Probability that
12:51DOJ or FTC will challenge again if it is
12:55quantifiable. I know it is quantifiable.
12:57I have written a paper about it. But if
12:59you cannot quantify it, it is fine. Um
13:03alternate strategies, do we need to
13:06diverse some certain assets or
13:08geographical limitation or any other uh
13:10restrictions and compliance and
13:12monitoring? This is when the deal making
13:15comes in and do study about uh the deal
13:18that Facebook just made with some states
13:21and also today's uh news about Warren
13:24Brothers and uh Paramount. They made
13:27deals for monitoring for compliance. Can
13:30we do that to convince DOJ to let this
13:33merger acquisition happen? And again uh
13:36uh with after completing all of those uh
13:39these task five or six tasks I just
13:42showed you the these are the main
13:44deliverables market def definitions HHI
13:48hyphenal index analysis
13:51uh application of antitrust laws u how
13:54this uh merger acquisition will be
13:56viewed in the United States given all
13:58the frameworks and policies efficiencies
14:01and mitigation again this is tricky part
14:04I would be very interested to see how
14:06you guys um take care of this part. And
14:09lastly, your recommendation. Should we
14:11go with the merger? Should we not go
14:13with the merge? Should we abandon it? Or
14:15if we need to have some mitigation
14:17strategies, what can be those mitigation
14:19strategy? If DOJ sues us, uh how can we
14:22really convince DOJ or FTC that uh we
14:26will not increase prices or pass on the
14:28cost savings and so on. And lastly, you
14:31are also given sorry I think you won't
14:34be able to see it uh completely. It is
14:36cut off. You are given this um um uh u
14:41rubric that uh you okay here it should
14:45be uh visible right now. It's a five
14:48element rubric. Each element is equal
14:50points. Uh so you will be grade graded
14:55uh as per this rubric. uh I would really
14:57like to highlight this APA style
14:59reference and formatting.
15:02Uh since I have told you you can do your
15:04own research. Now here is the dilemma.
15:08Uh use of AI is not uh explicitly
15:12allowed. You cannot really upload this
15:15uh work uh and ask AI to um to figure it
15:20out for you. it is easy to see AI work
15:23compared to a human level work. Um uh
15:27you know trust me it's how as instructor
15:29it's our job to really figure it out. Um
15:32so however you if you make a Google
15:36search and AI overview which is by
15:38default right now shows up and you are
15:41taking advantage of that uh please refer
15:44it uh let me know I I would be very
15:46happy to see uh how you are utilizing
15:49the sources and resources more
15:52ethically. So one thing here uh any
15:55resource any website any blog post any
15:59video uh any law case study you are
16:02referring to refer it even if you're
16:04reading it from the book refer hey this
16:09nip test I I read it from the book and
16:11I'm applying it here refer to the refer
16:13the book in AP7 for uh style there are
16:17websites there are guides who can help
16:19you provide intex citation provide the
16:22references at at the end and also write
16:24it in a way that looks like it's it's
16:26like an MBA class, right? So, this is
16:29your rubric. All the guidelines I have
16:32given you, I have read it for you, read
16:34it for yourself, uh you know, and ask
16:37questions. So, I would be very very
16:39happy to answer any of your questions.
16:41Uh so, good luck uh and all the best
16:44with this case study.