The world of corporations and business is one that moves a lot. Companies appear and disappear almost every day, at any time anywhere in the world. It is a dynamic world, so the industries and businesses are dynamic as well and are always looking to improve their status. One of the ways companies and corporations grow is through mergers and acquisitions, (M&A). The idea is to join forces and use the principle of “One plus one equals three” in order to gain advantages like a larger customer base, global footprint, access to distribution channels or suppliers, technical knowhow, and many other things. They don’t always go as expected, but when they do they give the business a competitive edge and enhance shareholder value. Let’s take a look at 5 mergers and acquisitions, that apart from being between 2 big corporations, they were all over the media headlines and were very important for countries, companies and the general public.
Facebook buys Instagram
|Image courtesy of Esther Vargas | Flickr|
In 2012, social network Facebook acquired the mobile photo-sharing service Instagram for the astonishing amount if $1 billion. At the time the company´s CEO Mark Zuckerburg said that it was not likely that they engaged in any other acquisitions of this size and importance. As everybody knows, Instagram is still an independent standalone app separate from Facebook, but with the acquisition, the idea was to improve the service ties between the two companies. The acquisition has been highly criticized because people don’t understand why they needed to spend a billion dollars to do something they probably could have coded in-house for a lot less money and could have gotten the same or even a better result and instantaneous market share.
Apple acquires NeXT
The catch for this business deal is that Steve Jobs used to be part of apple and he was removed from his post. He then founded NEXT and then, with this move, he returned back to apple. This acquisition happened in 1996 and the price was $429 million dollars. Steve Jobs revolutionized the Tech industry and was seen as an icon in Silicon Valley. Everybody knows how the story ends and the success that apple has had in the last 10 to 15 years.
AOL and Time Warner
|Image courtesy Thomas Belknap | Flickr|
This merger is the proper example of what companies shouldn’t do when they engage in this type of deals. This was a total disaster and it is even a case study in academic institutions on what not to do in acquisitions. Time Warner, one of the biggest media and entertainment companies in the world was acquired by America Online Inc (AOL) in 2000 for an amazing $ 182 billion. The merger was registered as the “the biggest mistake in corporate history” by Time Warner Chief Jeff Bewkes. At the same time the dot-com bubble bursted, and resulted in AOL Time Warner reporting a loss of $99 billion in 2002. Their idea was to create the world’s first fully integrated media and Communication Company for the internet century. As we all know, the company did not go that way and the merger failed miserably.
AT&T and Bellsouth.
In 2006 the communication giant AT&T acquired the telephone and communication technology company BellSouth in a deal that went up to $67 billion. The deal resulted in giving AT&T a local customer base of 70 million across 22 states further strengthening its dominance in the industry. Around that time, the company aimed to achieve a combination that would create a more effective and efficient provider in the wireless, broadband, video, voice and data markets. The two companies were already joint owners of Cingular Wireless with 60% ownership with AT&T and 40% with BellSouth and the idea with this merger was to be more innovative, nimble and efficient, providing benefits to customers by combining the Cingular, BellSouth and AT&T networks into a single fully integrated wireless and wireline Internet Protocol network offering a full range of advanced solutions.
Exxon Mobil merger
This merger was one of the most important mergers in the oil and gas sector. It happened in 1998 and the result was the Exxon Mobil Corporation (XOM), the largest company in the Oil & Gas sector was created. What they did was to bring together the fragments of Standard oil monopoly (Exxon Corporation and Mobil Corporation) in an $80 billion deal. At the time of the deal, Exxon and Mobil had a combined market capitalization of $237.53 billion.
As we can see, mergers can go wrong and can be very successful. It depends on how it is carried out. We wanted to point out some examples of very famous and well known mergers and acquisitions that have happened in the last two decades.