Emily Flippen

It'll be interesting to see where individual shareholders, the people who own the majority of Warner Brothers shares, ultimately decide because that's a decision that every shareholder needs to make for themselves, whether or not they take the cash or they hold out for the potential change in value of these capable assets.

One thing for me that is very clear from this deal is that

Regardless of whether or not a move forward, Netflix balance sheet is about to look very different than it does today.

Either they are making a massive acquisition and taking on a lot of debt in the process, or they have to pay a breakup fee that would be north of $5 billion, which would eat into their existing cash.

So for Netflix, this is a big change.

Up next, we'll be discussing what this means for consumers and whether or not this move puts Netflix on a smarter path or on a collision course with some of the failed mega mergers of the past.

Welcome back to Motley Fool Money.

We're zooming out at mega mergers and evaluating if Netflix is on the road to repeating history with its pending acquisition of Warner Brothers Discovery.

Now, I know when I think about entertainment mega mergers, my mind does go back to the year 2000, of course, when AOL and Time Warner sought to combine in a deal worth north of $180 billion that was intended to dominate both what they called new and old media business.

But of course, within just a few years, that merger actually led to nearly $100 billion loss, which at the time was the largest corporate loss ever, driven largely by Goodwill write-downs tied to the merger.

Of course, in 2018, AT&T closed its acquisition of Time Warner's assets for $80 billion.

That ultimately had to be unwound less than four years later, in no small part due to financial strain.

Of course, I'm not trying to say that all mega mergers are ending a disaster.

I think Disney's acquisition of 21st Century Fox back in 2019 comes to mind.

The stake they acquired in Hulu has been a great investment.

But in general, M&A is pretty challenging.

Research has suggested that anywhere between 70% to 90% of all mergers fail to achieve their stated goals or generate value for the acquirer's shareholders, which has naturally made Netflix shareholders concerned here.

Dan, when you look across some of these past mega-mergers, are there any patterns that jump out to you or things that make you think that Netflix is or is not repeating history here?

And to your point about the pricing here for Netflix consumers and HBO Max consumers, there's still this big question mark about regulatory scrutiny and whether or not regulators would even allow a deal, regardless of whether or not it's Paramount or Netflix, to move forward.

And this will be interesting.