Too small to succeed?

These days, there’s a corollary to being “too big to fail” – being “too small to succeed.” Not to oversimplify a very complex set of circumstances, but it can’t be a healthy thing when two mid-sized businesses call off a merger because of antitrust concerns. And this against a backdrop where (a) dizzying amounts of taxpayer aid has flowed to the biggest banks in the country and (b) the U.S. government practically forced mergers upon a handful of other banks (think Wachovia, Washington Mutual, and Bear Stearns).

And yet I read today where two small pretzel (pretzels!) makers have decided to call off a prospective merger for fear of unending FTC inquiries. When the Obama administration took office, everyone knew that the bar was going to be raised on government scrutiny of mergers. It was clear that there was going to be a more active merger and monopoly enforcement presence at the FTC. And this by itself is not necessarily a bad thing. But this latest bit of news, less than one year into the new administration, is already a matter of beating a housefly to death with a hammer.

Given that companies are keeping record amounts of cash on their balance sheets of late, it is understandable that Synders of Hanover might scupper M&A plans in order to further their cash conservation, but whatever the strategic reasons for scrapping the deal, FTC clearance should be at the bottom of the list for a company of its size and industry.

It is illuminating to compare the dropped deal by Synders of Hanover with the European Union’s recent €1.1 billion fine slapped on semiconductor chip manufacturer Intel. It took a lot of bureaucratic sweat, courage, and skill to amass the case against Intel, and I realize comparing merger clearance with prosecuting anti-competitive behavior is an apples-to-oranges comparison; however, I do think the scale and target of the EU’s enforcement action illustrates the yawning gap between America and Europe when it comes to the proper focus of antitrust enforcement. Just as it takes a lot of time and resources to prepare information in response to an FTC inquiry, it takes just as much time and resources to review the material. Why on earth would we want to waste our precious bureaucratic bandwidth on pretzels?

(HT: Vince Veneziani at The Business Insider)