The European Commission has elevated its review of the Google/DoubleClick (GOOG) to “Phase 2.” This likely means at least another 90 business days of purgatory (call it 4 months), at which point the EC will come back with one of three verdicts:
- Approved subject to conditions (sell this business, etc.)
The elevation to “Phase 2” is not necessarily an indication that the EC is likely to block the deal. The EC can be sued to defend its verdicts, and in a contentious situation like this, it could simply be making sure that it has assembled all the documentary evidence necessary to prove that it has done its job thoroughly. “Phase 2” can be extended, so this interminable waiting game might even be extended longer than another four months….
We reported at the end of September that insiders were confident that the key U.S. regulator, the FTC, would approve the transaction. Since then, several experts have suggested that this confidence is warranted. We expect an FTC decision within 3-4 weeks.
What Happens If FTC or EU Rejects The Deal?
If either regulator blocks the deal outright, the deal will be terminated. If either regulator approves the deal subject to conditions, Google is obligated to take all reasonable measures to satisfy those conditions. If the required conditions are too onerous, the parties will probably agree to a settlement, in which the deal is terminated (probably with a break-up payment to DoubleClick). DoubleClick would then likely be put back on the block.
Although the $3 billion price tag for DoubleClick raised eyebrows and drove the value of other advertising platforms to the moon, the values of such other platforms have stayed at the moon. Our understanding is that DoubleClick’s financial performance has remained strong, which means that the company could likely sell itself to Yahoo or Microsoft for at least $3 billion if not considerably more. So DoubleClick shareholders (Hellman and Friedman) will likely be fine regardless. Anyone who doesn’t work for Google or own its stock should probably pray for this latter outcome, as it will reduce the probability that a majority of global marketing efforts will eventually be conducted through one company.