M&A NOTES: Hollywood Drama – Paramount Lassos Warner Bros.

Paramount is paying $110bn in cash for Warner Bros. How is the deal financed? Why did they do it?

There’s never a dull moment in Hollywood. After many months of takeover struggle with Netflix, Paramount Skydance Corporation (Paramount) clinched the deal to acquire Warner Brothers Discovery (WBD) for around USD 110 billion. Paramount ended up agreeing to paying $31 per share to beat Netflix’s offer of $27.50. The parties signed the deal on February 27, 2026.

Paramount owns studios, CBS, MTV, Comedy Central, Skydance and much more. WBD owns studios, rights to many famous titles such Harry Potter, HBO, Discovery, CNN and more.

The takeover battle is over, but regulatory approvals are still needed. That process is expected to take several months before the deal is closed.

What can we glean from this drama?

A big M&A deal has its share of big issues. These included working out the price tag, finding the money, managing the deal and planning how to integrate two big businesses.

These issues are also discussed in the book “M&A This Way!”.

Below are additional comments on getting an M&A deal done, big or small.

Comments:

Below is our take on making an M&A deal of this sort succeed, big or small based on our own experience.

Psychology: M&A deals are 10% economic, 10% legal, 10% tax and 70% psychological. Consider what motivates each side.
Motive: Paramount announced it would make the next generation global media and entertainment company. Warner Bros and Paramount studies are expected to churn out 30 movies per year to be screened and streamed.

Comment: The motive for the deal is therefore to meet future trends and demand. In fact, Paramount is buying large scale streaming alongside Netflix, Amazon and YouTube. So Paramount’s real motive is fear of falling behind. The selling shareholders’ motive is presumably to make a big gain and move on.

Consideration: Paramount is paying cash. This will be financed by $54 billion of debt from Bank of America, Citibank and Apollo, as well as by $47 billion of new Paramount equity issued to the Ellison family and RedBird Capital Partners. Existing Paramount shareholders will be invited to participate in a rights offering of up to $3.25 billion. Much of this debt is “backstopped” by Oracle founder Larry Elison, father of Paramount’s CEO and Chairman David Ellison,

Comment: M&A consideration is typically cash or shares of the buyer. In this case it seems there was no incentive for WBD investors to swap their shares (stock) in WBD for shares for shares in another similar large group. Cash is king. Having the right Dad also helps sometimes.

Valuation: Paramount says the price tag for WBD ($110bn) represents a multiple of 7.5x on fully synergized 2026 EBITDA i.e. after cost savings, they hope to recover their investment in 7.5 years from earnings before interest, tax, depreciation and amortization. That implies layoffs.

Comment: The real payback period will presumably be longer because of interest payments on $54 billion of debt commitments and the need to pay tax on earnings. EBITDA is short for earnings before interest, tax, depreciation and amortization.

Ticking fee: The deal has been signed and announced but cannot close until shareholder and regulatory approvals have been obtained e.g. antitrust (anti-monopoly) approval. If the approvals process stretches beyond September 30, 2026, shareholders will receive an extra $0.25 per share “ticking fee” for each quarter until closing.

Comment: Time is money…..

However, speedisn’t everything. Striking a good deal at a fair price matters.
Antitrust approval: This can be a major issue in large M&A deals. Antitrust can also be an issue if a much smaller start-up has a monopoly grip on a new technique in our experience.

Paramount certified it’s compliance with the US Department of Justice’s Second Request for antitrust information and saw out a 10 day waiting period according to an SEC filing of February 19, 2026. This is a significant step on the way to antitrust approval needed from regulators around the world.

Comment: What’s is Paramount’s antitrust case? Paramount says the combined group will own a film library of more than 15,000 titles and establish another strong competitor in today’s streaming marketplace. It will remain an active buyer of content from third party studios and independent producers.

Risks: Paramount itself points out a string of risks associated with such a large leveraged. These include antitrust approvals needed, employee departures, distraction of management in the transition period, liabilities of discontinued operations and well as global political or economic factors.

Comment: As explained above, Paramount will need time to recover its investment given the interest costs on borrowings.

BATNA Comment: Netflix pulled out the takeover battle once the price tag exceeded its liking. But that’s not the end of the saga. Now Netflix will face a tight audience battle with the new group. Netflix presumably weighed up this possibility before dropping its pursuit of WBD. Netflix will need to deploy its BATNA – best alternative to a negotiated deal.
Limbo Period Comments: The deal is clinched, but it needs regulatory approvals which will take several months – a limbo period. But this is no time to sleep – there will be plenty of integration work to continue planning and implementing.
Integration: Integrating two businesses is never easy, especially two large businesses. Facets to consider range from different goals and cultures, to systems, suppliers, customers, cash flow, costs and potential cost savings. Paramount expects that the M&A deal will yield over $6 billion in synergies when the two businesses are integrated.

Comment: That implies a lot of layoffs in the combined workforce and/or supply chain economies. We don’t yet have the synergy details. Perhaps we will if they make a movie about this?

Regulatory approvals: These will be needed around the world according to Paramount. Apparently the biggest regulatory hurdle will be in the US where the two merging parties are based. The Financial Times thinks the takeover battle would have been simpler had it happened in Britain. This is because the UK Takeover Panel bans “no shop” provisions (which hampered Paramount), requires information to be available to all, and imposes time limits.

Comment: Appropriate legal and professional advice is needed in each country concerned.

Concluding remarks:

In this case: The upcoming antitrust and integration issues seem bigger and even more challenging than the M&A battle drama we witnessed.
Readers are advised: to review the issues of valuation, motive and regulatory requirements with professional advisors in each country concerned.
For more general M&A information: please read the book “M&A This Way! “available at https://mergeacq.ai/ma-book/.
For advice or assistance in specific cases: please email: [email protected]