AT&T and Time Warner hope to break the cycle of failed mergers

AT&T’s blockbuster bid for Time Warner might be a boon for investment bankers, lawyers and lobbyists, but it is anyone’s guess whether investors, employees and consumers ultimately would benefit from the combination. AT&T estimated that it could achieve $1 billion in cost savings in three years after buying Time Warner. AT&T CEO Randall Stephenson promised the merger would transform media because AT&T would be able to create new subscription and advertising models. Time Warner movies and popular TV shows like “The Big Bang Theory” could be promoted to AT&T cellphone customers. But some analysts have expressed doubts that such a massive tie-up will pan out the way that Stephenson and Time Warner CEO Jeffrey Bewkes hope — should the federal regulators allow the two companies to come together.

There’s good reason for skepticism: Many mergers fail to live up to the hype. “Most of them don’t work out,” said Rita Gunther McGrath, a management professor at Columbia Business School. “And the success rates for the big ones are abysmal.” Problems include challenges integrating disparate business units, conflicts in corporate culture and getting beat by rivals who respond faster to changes in market conditions.