The M&A Journey: From Competing Bids to Board Approval
Earlier this year, Netflix and Warner Bros., longtime entertainment giants, made headlines not because of a show or movie but for a major corporate acquisition.
On Dec. 5, 2025, Netflix Inc. and Warner Bros. Discovery, Inc. (WBD) entered into a definitive merger agreement under which Netflix would acquire Warner Bros. film and television studios, HBO and HBO Max, and its games divisions for approximately $82.7 billion, or $27.75 per WBD share, in a cash and stock mix.
Three days later, Paramount Skydance (PSKY) launched a hostile, all-cash bid of $30 per WBD share to acquire the entire company. Price was not the only difference between the two bids, as major acquisitions like this involve many complex, interconnected terms.
Over the next month, PSKY revised its offers while WBD shareholders rejected each one, following the board of directors’ recommendations.
The acquisition escalated on Jan. 12, when PSKY sued WBD in the Delaware Court of Chancery, seeking to compel the company to disclose details of its sale process and the Netflix deal.
Netflix amended its offer for the last time to an all-cash transaction on Jan. 20. After PSKY made its own amendment on Feb. 10, WBD agreed to reopen talks with the studio, giving them one week to submit their best offer.
Netflix withdrew from the deal on Feb. 26, after PSKY increased its all-cash offer to $31 per share. As part of the termination, PSKY had to pay a $2.8 billion termination fee to Netflix on behalf of WBD, a common contractual protection in M&A transactions.
Following the $110 billion merger’s overwhelming approval by WBD shareholders, the U.S. Justice Department’s Antitrust Division signed off on the acquisition on June 12. The approval followed a lengthy battle between Netflix and PSKY offering valuable lessons in deal structure, timing, and negotiation strategy.
Why Companies Pursue Acquisitions
M&A is a fundamental part of corporate strategy that can benefit both the buyer and seller. Common reasons to pursue acquisitions include:
- Accelerating growth.
- Acquiring additional market share.
- Diversifying revenue streams.
- Gaining resources such as talent, technology, and intellectual property.
- Achieving cost savings through operational synergies.
- Providing owners with a profitable exit.
These strategic motivations explain why attractive target companies often draw significant interest, and why competitive bidding situations can emerge.
The Role of Competing Bids
A competing bid is an alternative offer from a different buyer – in the Netflix and Warner Bros. case, Paramount’s initial offer was the competing bid. These situations can create both opportunities and challenges for target companies.
Companies typically submit competing bids after an initial acquisition announcement, often seeking to outperform the original proposal. A potential acquirer may make its competing bid more attractive by:
- Increasing the purchase price.
- Offering cash rather than stock (providing certainty of value to shareholders).
- Structuring financing creatively, including leveraged buyouts.
- Reducing contingencies and closing conditions.
- Proposing favorable post-merger terms, such as retaining key management.
Competitive bidding can create a bidding war, often driving up the sale price and providing the target company with leverage to maximize shareholder value. However, it can increase complexity, extend timelines, and attract public scrutiny.
Letter of Intent
Before parties engage in detailed negotiations and binding legal contracts, they typically sign a letter of intent (LOI). An LOI is a formal, generally non-binding preliminary agreement that outlines the essential terms of the deal and serves as a roadmap for the transaction.
Although Netflix and WBD reportedly did not execute a traditional LOI (having moved directly to a definitive agreement), most M&A transactions begin with one.
LOI terms vary by transaction, but can include:
- Purchase price and payment terms – The proposed purchase price and how the buyer intends to pay (cash, stock, seller financing, or a combination).
- Transaction structure – Specifies whether the deal is an asset sale, stock sale, or merger.
- Exclusivity – Prevents the seller from negotiating with other potential buyers for a set period, often 30–90 days.
- Scope of the deal – Identifies which assets, liabilities, and business operations the parties will include or exclude from the transaction.
- Confidentiality – Requires both parties to keep business information and transaction details private.
- Binding vs. non-binding provisions – While LOIs are generally non-binding, certain provisions, typically confidentiality and exclusivity, are legally enforceable.
- Conditions to closing – Requirements that each party must satisfy before the deal can close (regulatory approvals, board consent, financing, etc.).
An LOI sets the framework, reduces misunderstandings, and demonstrates the buyer’s serious intent, creating momentum before due diligence begins.
Due Diligence
After signing an LOI, but before finalizing the definitive agreement, the acquirer conducts due diligence to thoroughly investigate the target company.
Due diligence is a comprehensive evaluation that helps buyers assess risks and confirm the acquisition’s viability by reviewing financial records, legal obligations, operational capabilities, and potential liabilities that may impact the transaction or purchase price.
Key areas typically evaluated during due diligence include:
- Financial – Historical financials, projections, debt, and accounting practices
- Legal – Contracts, litigation, intellectual property, and regulatory compliance
- Operational – Business processes, technology systems, and supply chain
- Commercial – Customer relationships, market position, and competitive landscape
- Human resources – Key personnel, employment agreements, and benefit obligations
Based on due diligence findings, the acquirer may renegotiate terms, request price adjustments, require additional protections in the definitive agreement, or walk away from the deal entirely.
Board of Directors and Shareholder Approval
Approval requirements vary by entity type, jurisdiction, and transaction structure. For corporations, the governing documents, typically the articles of incorporation and bylaws, establish voting thresholds and procedures.
In any corporate acquisition, board members owe fiduciary duties to the company and must act in the best interests of shareholders. Additionally, Revlon duties, which arise when a sale or change of control becomes inevitable, require the board to consider all reasonable bids and avoid defensive measures that would favor one bidder without a legitimate business justification.
Boards typically rely on financial advisors for fairness opinions and legal counsel for transaction guidance to fulfill these obligations and protect against potential liability.
Once the parties obtain final board and shareholder approvals, they must clear any remaining regulatory hurdles, such as antitrust review, before closing the transaction.
Final Thoughts
As the WBD-Paramount saga illustrates, even common elements of M&A transactions, like competing bids, letters of intent, due diligence, and board approval, can play out very differently depending on the circumstances. Each deal has its own dynamics, risks, and strategic considerations.
Most transactions may not match the scale or public drama of the WBD deal, but they follow a similar process of identifying opportunities, evaluating risks, negotiating terms, and navigating approvals.
Whether running a small business or leading a large corporation, an experienced M&A attorney can help navigate these complex transactions and protect your interests throughout the process.
Nicholas J. Vitale is a Corporate and Mergers & Acquisitions Attorney at Lewitt Hackman.