By Peter Cohan | Forbes
The Arizona Republic was a Gannett property
(Editor’s note: Opinion pieces are published for discussions purposes only.)
Don’t bet that these are two tastes that will go better together. After all, the merger looks likely to fail the four tests for a successful acquisition.
(I am a columnist for a GateHouse Media newspaper and have no financial interest in the securities mentioned in this post).
What happened? As the Wall Street Journalreported, on August 5 New Media Investment Group, the parent of GateHouse Media, announced a deal to pay $1.4 billion in cash and stock to buy Gannett expected to close this year.
The combined company will host 615 titles — 400 from GateHouse and 215 from Gannett — and 8.61 million subscribers — adding GateHouse’s 4.32 million to Gannett’s 4.29 million.
To help finance the deal — which is expected to achieve cost savings between $275 million and $300 million — Apollo Global Management is making a term loan of $1.79 billion with an 11.5% annual interest rate, according to the Journal.
Most mergers fail and as I have written, to boost the odds for success, business leaders should only do deals that pass four tests. Here’s why I think this deal is likely to fail all of them.