Five months ago, US Airways and American Airlines announced plans to merge into a single airline. Mergers allow two or more business entities to combine into a single company. This is often a good way for New Jersey companies to grow or to save themselves from financial trouble — by acquiring access to a healthier company’s assets. Mergers tend to be complex business transactions that require skillful negotiation, and expert execution to be successful.
In the American Airlines case, this merger was supposed to help American Airlines out of bankruptcy — which the company filed in 2011. If the merger is completed, the resulting company would be worth $11 billion. American Airline’s parent company, AMR, was recently going to present this merger as part of its reorganization plan to the bankruptcy judge in the hopes that the plan would be approved. However, these plans were thwarted by the U.S. Justice Department.
Instead, the DOJ filed a lawsuit challenging the merger between American Airlines and US Airways. According to DOJ officials, this merger would violate antitrust laws which seek to prevent monopolies. Attorney General Eric Holder says that this merger would end up costing the American people too much money by driving up the cost of air travel. If the DOJ wins this suit, the merger will not be allowed to be completed.
Antitrust issues are just one of the many problems that New Jersey businesses can run into when trying to complete a merger. While many businesses will not have the assets of American Airlines or US Airways or be involved in a large public merger, these issues still need to be addressed. However, with proper planning and execution, a merger can be a successful transaction for many businesses.
Source: The Star-Ledger, “DOJ blocks $11B US Airways-American Airlines merger,” Stacy Jones, Aug. 13, 2013