Tag: Market Competition

Breaking Up is Hard to Do

Senate legislation introduced to target Pharmacy Benefit Managers

Neil Sedaka, a singer, songwriter, and pianist who died last week, hit the charts in the early 1960’s with the hit single, “Breaking Up is Hard to Do.”  He liked it so much that he released a newer version of it some 10 years later, with a slower tempo.

The Break Up Big Medicine Act

Senators Josh Hawley and Elizabeth Warren are looking to put that phrase to the test when it comes to going after Pharmacy Benefit Managers in the health care industry.

The act, officially titled, “The Break Up Big Medicine Act”, was released in February.  The bipartisan measure seeks to reign in the monopoly they feel exists with both prescription drug claims and prescription drug wholesalers, and the insurance companies, physician groups and pharmacists who are involved.

On their official website, Senator Warren is quoted as saying:

“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor. The only way to make health care more affordable is to break up these health care conglomerates.  Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.”

Senator Hawley says:

“Americans are paying more and more for healthcare while the quality of care gets worse and worse. In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.  Working Americans deserve better. This bipartisan legislation is a massive step towards making healthcare affordable for every American.”

Pharmacy Benefit Managers

Pharmacy Benefit Managers (PBM), are companies hired by health plans to manage prescription drug benefits. Which drugs are covered, how much they cost, and where patients can fill prescriptions are determined.  Such things as to what pharmacies are “in network,” prior authorizations, and obtaining price discounts in exchange for favorable positioning are selected.  They started out mainly as an administrative service but grew in power to issue decisions in the daily operations of the pharmacy web.

The largest PBMs in the United States are CVS Caremark, Express Scripts, and Optum Rx. Together, they process nearly 80% of all U.S. prescription claims. 

The largest prescription drug wholesalers in the United States are McKesson, Cencora (formerly AmerisourceBergen), and Cardinal Health. They control over 90% of the U.S. drug‑distribution market.

On their website Warren and Hawley state the companies involved are “vertically integrated”.  This means one company can own or control every part of the health care supply chain—from health insurance companies and PBMs to pharmacists and physicians.

“By controlling both the company that pays for health care services (e.g., a health insurer) and also the entity that sets the prices for those health care services (e.g., a health care provider), these conglomerates may be steering business to their own affiliates, evading laws intended to rein in corporate profiteering, or using providers they employ to boost government payments and pad their bottom lines.”

Analysis

In my opinion this is an uphill fight for the two Senators.  Breaking up here is hard to do.  But it is a step in the right direction.  Legislation or court rulings can be part of the solution.  It is better than simply using social media to bad mouth corporations and their executives.  Social media is freedom of speech and can draw a lot of attention but leads to no solution.  It is also better than cheering on those who assassinate health care executives. 

The health care monopoly is bigger than pharmacy benefit managers.  For example, this legislation does not address its historical acquisition mania and the power it has produced.   Nevertheless, I encourage all of you to contact one or both of your U.S. Senators and express your support.  I am not sure it will garner the support, let alone the attention, of the Trump administration.  But, as I said, it is a step in the right direction.

 

 

SKYDANCE-PARAMOUNT Merger – More than Just News

A chess match with big players and high stakes, but employees may suffer.

The proposed acquisition between Skydance and National Amusements Inc., the parent company of Paramount, is a boardroom chess match with multiple players and multiple outcomes.

Paramount is owned by the parent company National Amusement, of which Sheri Redstone owns a majority percentage of voting stock.  They operate such networks as BET, MTV, Nickelodeon and Paramount Films.  It is also the parent of the CBS television network, which includes CBS News.  Skydance was founded in 2010 by David Ellison.  Its claims to fame have been producing “Top Gun: Maverick” and “Mission Impossible—Ghost Protocol.”

THE DEAL

According to Cord Cutters website, here are the details of the deal:

The Skydance-Paramount deal, with an enterprise value pegged at $28 billion, promises a major shakeup in the media landscape. Skydance Media, LLC, valued at $4.75 billion in the merger, brings its production heft—think Mission: Impossible—to Paramount’s storied assets, including CBS and the Paramount film studio. National Amusements Inc. (NAI) shareholders, led by Redstone, will pocket $1.75 billion plus the assumption of NAI’s $650 million debt, totaling a $2.4 billion enterprise value. Paramount’s Class B common shareholders are set to receive $15 per share. Funding comes largely from the Ellison family—Oracle founder Larry Ellison is contributing $6 billion—alongside $2 billion from RedBird Capital Partners. An October filing clarified that Skydance CEO David Ellison, not Larry, will hold 100% of the family’s voting interests in the merged entity.

This merger was first proposed in 2024.  Talks originated, then were apparently cancelled by National Amusements, Inc. They resumed shortly thereafter.  By July, 2024 the current deal was presented. 

ROADBLOCKS

There have been several hurdles to overcome.  In February 2025, Paramount Global and Skydance Media, LLC, received approval from the Securities and Exchange Commission.  The deal soon after received approval from the European Commission, saying it presented “no significant competition concerns within the European market.”

It also needs approval from the U.S. Federal Communications Commission, which is still in play.  Here is where it gets interesting.  The FCC is currently headed by Brendan Carr, a recent Trump employee.  Trump has been pressuring acquiring companies to back off/do away with Diversity, Equity and Inclusion (DEI) programs.  Paramount recently announced they were doing just that.  Mr. Trump had also filed a $20 Billion lawsuit against CBS News, claiming they edited an interview with Vice President Kamala Harris he claims was biased towards her and from him. 

To add to the drama, Bill Owens, Executive Producer of 60 Minutes abruptly resigned last week.  In The Last Minute segment of the April 27 broadcast of 60 Minutes, host Scott Pelley addressed his resignation.  Mr. Pelley summed up his message by saying, “Bill felt he lost the independence that honest journalism requires.”  There has been consolidation in the news media, along with the entertainment industry and the publishing industry.  This consolidation will be addressed in a later article.

ANALYSIS

Consolidation in the entertainment industry is not as “crucial” as it is, say, with health care, insurance, groceries, housing.  Indeed, there is competition with such companies as Netflix, Disney, Apple, Amazon, as well as network television, movies, theatre, concerts.  However, what all companies involved in consolidation have in common is that there are both employees and customers whose livelihood is impacted, in different ways.  Company working culture may significantly change for the worse.  Customers may be faced with poor/indifferent customer service or continually rising prices. 

SOLUTIONS

The proposed acquisition between Skydance and National Amusements Inc., the parent company of Paramount, is a boardroom chess match with multiple players and multiple outcomes.

Paramount seeks a buyer because it is hemorrhaging money, mainly due to cable cutters who are now streamers.  They were slow to adjust to changing market conditions.  They made some strategic mistakes.  If Paramount is sold, Shari Redstone will come out well, as do some owners in the aftermath of blunders.   If it is finally approved, the big continue to get bigger—in this case it would be Skydance Media, LLC.  If it fails, National Amusements Inc. may have to sell off assets or face bankruptcy sometime down the road. 

With all the drama, this would make for a good movie, wouldn’t it?  I doubt if people who lost their jobs or faced a negative company culture would ever see it.  What do you think?

Zuckerberg May Have Meta’s Match

Meta may have tried to neutralize a potential competitor

META

The Federal Trade Commission is beginning an anti-trust suit against Meta.  This time it involves its owning What’s App and Instagram.  Their argument is a monopoly exists with owning these acquisitions, they wanted to neutralize a potential competitor, and they should be spun off.

BACKGROUND

A report on National Public Radio gives a background of the government’s case against Meta:

“The government contends that a “buy or bury” strategy propelled Meta’s acquisitions, leading Meta to gobble up competitors it viewed as threats, or to squash the rivals out of business altogether.”

It adds that an internal Meta email says they purchased Instagram to “neutralize a potential competitor” and the FTC believes this is against federal law.

The report says that Meta will summarize its argument that it is being punished for being innovative and aggressive, in other words…. successful.

According to Wikipedia, Meta/Facebook has acquired 91 companies, including What’s App and Instagram.  They have also acquired an interesting company—Onavo.  Onavo was an Israeli company in business to acquire and analyze data on a client’s competitors.  Facebook has apparently used this to track successful startups for acquisition.  The website www.onavo.com has a Facebook message that says something has gone wrong.  Facebook changed it to Facebook Israel, which promotes travel to Israel.  It has also apparently deleted numerous posts about Palestinians. 

In 2010 Facebook posted a video available on YouTube.  In it Mark Zuckerberg talks about the theory behind Facebook acquisitions.  He says that Facebook, up until then, had acquired companies not to keep the company but to acquire the talent behind it.  In other words, the owners become employees (once again) and the startup disappears.  The official line is that this is growth to them.  However, it is entirely possible to acquire good talent through direct hire, including through employee search, instead of going the acquisition route.

WHAT’S APP

According to Wikipedia What’s App was founded in 2009 by two individuals, Brian Acton and Jan Koun, previously with Yahoo! They received venture capital backing.  They sold the company to Facebook in 2014.  Acton left What’s App in 2017 over disagreements with Facebook.  Later that year he founded the competing app Signal.  Koun left the following year, also with conflicting issues with Facebook. 

ANALYSIS

FACEBOOK

There is nothing wrong with companies like Facebook/Meta with being successful.  This is Meta’s argument.  However, the end does not justify the means in this case.  Defining success through innovation – that which you started yourself from scratch – is not the same as defining it via acquisition.  And if you have acquired 91 companies, that in and of itself should warrant charges of being a monopoly.  I am not sure if people in the FTC under the Trump administration have a true anti-trust focus.  Trump supporters seem to be focused more on going after the social media apps more for suppressing freedom of speech.

SOLUTION

Breaking up the acquisitions and returning them to independent status is, IMO, a good solution.  This would return them to a position again of charting their own course. Meta will present their arguments, and some may have some weight.  It really comes down to balancing the arguments and determining which has a greater priority. 

The FTC’s argument is that Meta seeks to neutralize a potential competitor.  If judicial decisions like this fail in the courts, federal law would need to be strengthened to make the anti-trust arguments more airtight.  The law, for federal judges to agree, should be written such that it promotes what is in the best interest of the country as a whole, and not one just for individual business.

Google’s Buy of Wiz May Not Be a Whiz-Bang

Past anti-trust pursuits may stall or stop this buy from going through

Google announced on March 18, 2025 a $36B (B as in billion) acquisition of Wiz.  They are a relatively new startup involved with cybersecurity. 

Google is technically a subsidiary of Alphabet, the parent company that owns Google and all the other acquisitions.

This would be Alphabet’s largest payout for an acquisition. 

This acquisition was attempted just last year in July.  Wiz declined the then offer of $23 billion, saying they wanted to pursue an initial public offering. 

This acquisition plans to undergo federal anti-trust scrutiny.  A major reason is that over the years Google has acquired a boatload of companies.  According to Wikipedia, the total is a staggering 261!  Some of those bought are You Tube, Fitbit, Android, reCAPTCHA, Invite Media, Skybox Imaging, Dropcam.  Google is technically considered one of the acquisitions, thus under Alphabet. The question here is, does a company with over 250 acquisitions qualify as a monopoly?

Alphabet has a history of anti-trust pursuits, and not all by the U.S. government.  Most of these have been over Google’s perceived monopoly over the search engine market, including entering into exclusive agreements with device manufacturers to provide its browser.  A separate lawsuit focuses on its digital advertising platform.  Not only by the U.S. federal government but also European governments as well.  My argument is whether Google has created a monopoly based solely on its acquisitions. 

ANALYSIS

What’s wrong here?  How can you avoid being slapped with the name of oligarch if you have over 250 acquisitions?  How can you avoid this scene being labeled as a monopoly?  Does your company have over 100 acquisitions, let alone 250?  Is acquisition the only way for Google to “grow?” 

If Google needs improvement with cybersecurity, can’t they develop their own?  Or they could form a partnership.  Or they could simply purchase the service as a customer.  These other companies could still exist as independent entities.  Why does Wiz and hundreds of others have to be “acquired”. Alphabet may have legitimate evidence to justify it.  However, theirs is not the only valid point of view here.  It then becomes determining which valid argument takes priority.

POSSIBLE SOLUTIONS

  • Have Alphabet pay an annual acquisition tax for every acquisition they have made.  The idea here is not to slap a tax on simply being large but on specific behavior. 
  • Have the courts break up Alphabet from its acquisitions, leaving what it may have developed itself.
  • Provide “incentives” for Google and the other Big Tech companies to divest their acquisitions on their own.  Divestiture is something recently pursued by both General Electric and Honeywell.
  • If the courts rule that Google is not a monopoly, laws need to be rewritten so the courts can rule based on specific statutes and not on wide interpretation.

This proposed acquisition will be interesting to follow in the coming months. Future articles here will explore further the idea of defining “growth” as well as this pursuit of divestiture.

Cintas and UniFirst Visions aren’t Uniform

This is a classic example of what’s wrong with mergers and acquisitions today. 

Cintas Uniforms Truck

On January 7, 2025, Cintas Corp. announced a $5.3 Billion offer to purchase rival UniFirst.  Both companies’ core business is corporate uniforms.  Cintas is headquartered in Mason, OH, over 20 miles north of Cincinnati.  UniFirst is in Wilmington, Massachusetts. 

This proposed acquisition has an interesting history.  Cintas proposed acquiring UniFirst in February 2022, but the offer was rejected.  Management has now rejected this second offer.

Steve Watkins of the Cincinnati Business Courier quotes Cintas CEO Todd Schneider saying:

 “We call on the UniFirst board, its controlling shareholders and management team to immediately engage with us to reach a mutually acceptable definitive agreement that delivers the full value of this combination for shareholders and other stakeholders…We firmly believe in the compelling strategic fit between our two companies, and our offer would deliver immediate and compelling value to UniFirst shareholders…The combination would also amplify the benefits of Cintas and UniFirst’s ongoing technology investments to drive growth and benefit our collective customers and employee-partners.”

UniFirst issued a response, saying:

“The board conducted a careful review of the unsolicited proposal and determined that it is not in the best interests of UniFirst, its shareholders and other stakeholders,” adding the decision was made based on the offer price, business risks and feedback from its largest shareholders.

Cintas

Cintas is 3½ times larger, with $9.6 Billion in revenue, versus $2.7 Billion for UniFirst.  UniFirst has an interesting strategy, though, to fight back.

UniFirst posts on its website suggestions directed at customers of companies acquired by Cintas to consider switching to them.  And there is more than one company listed.  How about that!

Resistance Strategy

Cintas is not a bad company.  Watkins published an article in 2024 that highlights its positive work culture. 

Analysis

Cintas’s approach to acquiring UniFirst is a classic example of what’s wrong with mergers and acquisitions today.  It is a business chess game where the opponent is forced to play.

If someone came out of the blue to tell you what is in your best interest, would you like that?  Is this a way to win friends and influence people?  I know that many people preach about the benefit of “persistence”, but in this case “persistence” is really bullying, isn’t it?

If a company’s management is actively pursuing an acquirer, do their homework and find “the right fit”, that’s one thing.  A merger may be a better option than an acquisition, though.  In this case bullying tactics are used where the only real question the acquirer asks is “what’s in it for me?” 

Corporate Directions

Cintas’ approach to its employees is totally different to its acquisition process, isn’t it?  It is like they act as a Jekyll and Hyde company.  Do you believe companies should engage in bullying tactics with their competition?  Is this how you operate?  Does the end justify the means here?

DELAY, DENY, DEFEND…and DISCLOSE

Health Care Acquisitions contribute to the large CEO Compensation Gap

We need to further explore actions taken by United Health, and the connection between health insurers CEO compensation and their acquisitions.

Brian Thompson

Brian Thompson’s death on December 4, 2024, captured much attention, both for the murder and hateful backlash against United Health Care. 

Before proceeding, I want to say that IMO, the end does not justify the means here.  On my home page I argue it is important to focus on HOW things are done, not just on the end result.

It is important to note that Mr. Thompson was the CEO of United Health Care, but Andrew Witty is the CEO of the parent company, United Health Group.  Also, Tim Noel has recently been appointed to replace Mr. Thompson.

United Health Care

Fortune 500 magazine has United Health Care in the top 10 of 500 companies, ranked by revenue, for 2023.

ProPublica reports they have been criticized in the past for denying coverage of mental health claims.  According to the article, UHC had been using algorithms instead of reviewing all claims independently. 

United Health is not the only one to do this.  EviCore by Evernorth, owned by Cigna is the major player here, providing decision-making services to multiple health insurers based on algorithms.

CEO Compensation

Insurance Business magazine provides data on the CEO compensation by the top health insurers in the United States.  It includes CEO compensation and the ratio between that and the salary of the average employee.  Published in November 2023, it is based on statistics provided by the National Association of Insurance Commissioners.  Here are the top 5 earners:

Joseph Zubretsky           Molina HealthCare        $22.1 million    278:1

Karen Lynch                      CVS Health                       $21.3 million    380:1

David Cordani                  CIGNA HealthCare       $20.9 million    277:1

Gail Boudreaux               Elevance Health Care  $20.9 million    383:1

Andrew Witty                    United Health Group    $20.8 million    331:1

United Health Group is reported to have made 25 acquisitions, spending over $36 Billion for them.  That’s B as in Billion.  Its largest has been Change HealthCare.  Hovering over some of the other company names you will find links to their acquisitions as well.  If United Health Care had not made these acquisitions, do you think they would be as big as they are today?  Same with the others.  If they had taken that $36 billion and invested it on R&D, better coverage or on increasing employee salaries, do you think that ratio would be as big as it is? 

The Economic Policy Institute has recently released a report of CEO compensation since the 1970s.  It spiked in the 1990s when Mergers and Acquisitions began to take off beginning (but not ending) under the Clinton administration. 

What Can Be Done

I do not have the resources that institutions have to crunch the data and spit out results.  A direct relationship between acquisitions and income inequality between CEO and average employee, in my opinion, may exist.  This may “contribute” and not necessarily “cause” this inequality.  There may be other factors that contribute, such as CEO pressure on corporate boards to increase compensation.

What can be done here?  One would be for Congress to institute an annual “acquisition tax” on the top companies with the largest number of acquisitions.  Or have the Federal Government break off companies that have been acquired.  Another could be tax incentives to encourage “divestiture” or to block future acquisitions being made. Also, prohibit future acquisitions.

One thing that shouldn’t be done is for individuals to take it upon themselves to attempt to assassinate executives or to celebrate it.  As a result of this act some people lost a family member and others lost a colleague. Nothing changed for policy holders…. did it?

What Do You Think?

What do you think?  Is there a connection between acquisitions and the size of CEO compensation?  Should algorithms be the main source for accepting or rejecting claims? Do you have a problem with this? Has not only the compensation gap but the physical barriers between the decision makers and customers grown too impersonal?