FOR IMMEDIATE RELEASE
What Netflix’s Decision Reveals About Capital Allocation, Valuation Integrity, and Long-Term Value Creation
In light of the recent announcement that Netflix, Inc. declined to raise its offer for Warner Bros. Discovery, many observers have focused on the competitive dynamics of the bid process. In this, we see something more fundamental. We see discipline.
When leadership determines that a transaction is no longer financially attractive at a revised price, and chooses not to proceed, that is not retreat. It is capital allocation integrity. It is clarity. It is stillness.
We often explain that the best deals are not defined by motion. They are defined by alignment. And alignment cannot be rushed.
How Business Actually Works
In simple terms, business value is not the price you pay. It is what remains after risk, integration complexity, regulatory burden, cultural alignment, infrastructure capacity, and long-term strategic positioning are accounted for.
Price is visible. Risk is not.
Before any acquisition makes sense, leadership must evaluate whether the combined infrastructure can absorb compliance and operational integration; whether projected synergies are realistic or aspirational; whether cultural systems can integrate without erosion of performance; whether the capital structure can support the transaction without constraining future flexibility; and whether the deal advances a long-term generational vision rather than satisfying short-term market pressure. Only after those considerations can you assess the true bottom line.
Research consistently shows that discipline matters. Studies published in Harvard Business Review indicate that between 70% and 90% of mergers and acquisitions fail to achieve their intended strategic or financial objectives. McKinsey & Company has similarly reported that approximately 70% of acquisitions fail to create value for the acquiring company’s shareholders. The lesson is not that acquisitions are flawed. The lesson is that overpaying and overreaching are common.
The Hidden Cost of Overpaying
When companies stretch beyond valuation discipline, the cost does not always show up immediately. It appears later in goodwill impairments, balance sheet pressure, and lost strategic flexibility.
During the early 2000s, the widely cited merger between AOL and Time Warner became a case study in strategic overreach. The combined entity ultimately recorded goodwill impairments exceeding $99 billion, one of the largest write-downs in corporate history. The issue was not ambition. It was overpayment relative to sustainable integration value.
More recently, Deloitte has reported that goodwill now represents a significant portion of total assets across major public companies, increasing exposure to impairment risk when projected synergies fail to materialize.
Overpayment restricts optionality. It burdens future capital allocation decisions. It reduces resilience.
When leadership declines to match a higher bid because the economics no longer justify the risk-adjusted return, that is not weakness. It is the application of valuation discipline.
Case Study in Strategic Restraint
The philosophy of disciplined patience is not new. Warren Buffett has repeatedly emphasized that Berkshire Hathaway prefers to wait rather than deploy capital at unattractive prices. In multiple shareholder letters, he has written that it is better to hold cash than to pursue acquisitions that do not meet strict return thresholds.
Berkshire Hathaway has demonstrated over decades that selective acquisition discipline, paired with long-term capital allocation rigor, can generate sustained shareholder value. Academic research consistently ranks Berkshire among the highest long-term compounders of capital in modern corporate history.
That success did not come from doing more deals. It came from doing fewer deals at the right price.
Stillness.
Why This Matters to Middle-Market Founders
Most business owners are not negotiating multi-billion-dollar media transactions. But the principles are identical.
In the middle market, I often see founders tempted by valuation multiples that appear attractive on the surface. Buyers may present aggressive projections. Advisors may emphasize momentum.
Yet the real evaluation must go deeper: Does the buyer’s infrastructure support future growth? Will the capital structure constrain reinvestment? Is cultural continuity protected? Does the deal enhance long-term wealth preservation? Is the transaction aligned with generational objectives?
A deal is not inherently success. A closing is not inherently value creation.
PwC has reported that disciplined acquirers — those that adhere strictly to return thresholds and integration frameworks — significantly outperform serial acquirers who pursue volume without consistent valuation guardrails.
The same principle applies to sellers. Strategic patience can increase enterprise value dramatically when timing, positioning, and preparation align. Sometimes the most profitable decision is to prepare further, strengthen operations, optimize margins, clarify positioning, and return to market later under stronger conditions.
STILLNESS as Strategic Discipline
In markets that reward speed, stillness appears counterintuitive. Yet stillness is often the highest form of discipline. It requires leadership to withstand external pressure, clarity about intrinsic value, confidence in organic growth, commitment to long-term strategy over short-term validation.
When a company declines to pursue a transaction because the economics no longer align, it reinforces something fundamental: capital must be deployed where risk-adjusted return justifies it.
That principle governs billion-dollar public companies. It governs privately held family businesses. It governs generational wealth creation.
Sometimes the right move is execution. Sometimes it is acquisition. Sometimes it is divestiture. And sometimes it is restraint. In business, motion is visible. Discipline is not. But over time, disciplined allocation determines outcomes. There are moments when advancing is correct. There are moments when consolidating is prudent. And there are moments when the most powerful move in business is the decision not to move.
