Flops, shocks and major feats - Memorable company mergers and acquisitions

Mergers and acquisitions are commonplace in the corporate world. High-performing companies will often make eye-watering offers to purchase a competitor or emerging company in order to complement their own growth strategy and diversify into new markets.

More often than not mergers and acquisitions do wonders for both parties. Shareholders involved in the company being acquired enjoy great financial benefits while staff will be afforded great new working opportunities with greater resources. For the purchasing company, they’re getting exposure to a new audience, access to a successful product and new avenues to explore with regards to research and development.

However, we all know that overnight success isn’t always the case, sometimes two companies just do not work well together, whether that be down to a clash of philosophies, priorities or individual personalities at management and boardroom level.

In this article we’re taking a look at some of the biggest and most shocking failures, successes as well as future mergers and acquisitions that could rock the industries they operate within.

Not so good - Failed mergers and acquisitions

Despite being visionaries and leaders, many renowned CEOs have made moves that seemed like they’d make great sense, but ultimately turned out to be monumental loss-making duds. In some cases these moves have absolutely killed at least one of the companies involved, in others it’s just a minor setback.

Apple acquiring NeXT

At the latter end of 1996 Apple made a shocking move to acquire NeXT Software which saw then ousted CEO Steve Jobs offered a way back into the company he founded back in 1976.

Apple wanted to replace the Mac’s outdated system software which had become difficult to work with, and NeXT provided what they thought would be the perfect solution to the problems the now-struggling company was suffering from.

Already hampered by a financial crisis and lack of leadership, their woes worsened, as it turned out that NeXT was not the answer to Apple’s problems. Despite being well-designed it was always suggested that it was just too ahead of its time and not at all cost-effective.

However, this merger is somewhat of a paradox, as it’s widely considered to be one of the most successful failures of all time. Had Apple not purchased NeXT then Steve Jobs would never have returned to the company, eventually rising back to the top of the corporate tree where he would completely turn Apple around, making them into a modern-day powerhouse. Furthermore, we might never have seen the creation of the iPhone and other iconic products such as the Macbook, iPod and iPad.

AOL acquiring Time Warner

At the start of the new millennium the world was rocked by the news that two of the biggest companies in American history, AOL and Time Warner were set to merge in a landmark $350 billion deal between the internet giant and media conglomerate.

Heralding the merger Stephen M. Case, co-founder of AOL proudly stated “This is a historic moment in which new media has truly come of age”... This was most certainly not the case. Today, the merger between the two companies is taught in business schools around the world as an example of what not to do.

There are many reasons that this historic merger failed, starting with the dot-com bubble bursting. In the early 2000s Internet-based companies values were hugely inflated, and AOL was absolutely no exception. With the bubble bursting, advertising revenue plummeted and AOL was unable to deliver the revenue that was predicted when the deal was put into place.

Huge advancements in technology also caught up with AOL, whose dial-up internet service was beginning to fall behind competitors who were developing new high-speed internet access.

It would be unfair to place the blame all on one side though. Time Warner weren’t without their issues, it was widely reported that staff at every level of the company, and even shareholders harboured real contempt for their AOL colleagues, making collaboration difficult for both parties.

The combined company's biggest shareholder and Vice Chairman of Time Warner Ted Turner personally lost $8 billion as a result of the failed merger and once said: “The Time Warner-AOL merger should pass into history like the Vietnam War and the Iraq and Afghanistan wars. It’s one of the biggest disasters that have occurred to our country.”

MySpace acquired by News Corp

If you asked anyone in 2005 where the cool place to be was online they’d instantaneously reply with Myspace. The then massively popular social media network led the way in the race for dominance in the fledgling social media arena with an impressive 100 million users globally.

The site was a hive of activity and was well known for being a breeding ground for talented musicians, bands and artists such as the Arctic Monkeys, Lily Allen, Calvin Harris and Adele all got their initial breaks there. It’s not hard to see why Rupert Murdoch had his well-trained eye on the ever-growing site.

Murdoch’s Newscorp beat rivals Viacom to the purchase of the site for a modest $850 million after an intense bidding war in 05. Unfortunately for Murdoch, this was one acquisition that was destined to end disastrously for the media tycoon, despite proudly proclaiming that the site would make $1 billion in revenue in the year following his purchase. However, it has to be said that Myspace’s failure was never down to anything they’d done wrong as owners.

As social media was a fairly new concept back in 2005 site creators Chris DeWolfe, Tom Anderson, Murdoch, or any of his colleagues at board level for that matter, could never have predicted the gargantuan rise of Facebook.

As users flocked to Facebook advertising revenue began to dry up and eventually Myspace was tossed aside by Newscorp and left to rot. Myspace attempted to rebuild itself as the home of entertainment and music, and was even sold to Justin Timberlake for a fraction of the original price in 2011.

Myspace has since gone through an additional two owners (Including renowned media company Time) in the following years, failing to regain the past success it once enjoyed.

Astounding acquisitions - The best moves in business history

It comes as no surprise that some of the most successful modern day acquisitions have been undertaken by companies that have remained steadfast in staying true to their original mission statement, despite diversifying their portfolio. Here are just a handful of winners.

Facebook acquiring Instagram & WhatsApp

In 2012 Facebook CEO Mark Zuckerberg spearheaded what was largely considered one of the best acquisitions in the history of Silicon Valley when he purchased Instagram. At first the purchase was met with scepticism as Instagram only had 13 members of staff and didn’t generate any revenue whatsoever.

With Google and Twitter both circling the fledgling photo sharing app at the time, Facebook swooped in, purchasing Instagram for $1 billion. In 2019 alone Instagram generated $20 billion in advertising revenue, showing critics just how shrewd of a move this was.

Two years later Facebook moved to further expand their portfolio by acquiring giants of the messaging world, WhatsApp, for $16 billion in cash and stock. Zuckerberg and co made this move for two reasons, firstly to beat Google to the purchase, secondly because WhatsApp was seen as one of the fastest growing apps in terms of individual active users.

Purchasing them eliminated any long-term threat they may have one day posed to Facebook.

Whilst WhatsApp doesn’t generate revenue, due to being free to download, having access to over 2 billion active users is just as valuable to Facebook in the long run.

Disney acquiring Pixar, Marvel & 21st Century Fox

Disney has spent hundreds of billions of dollars over the last 60 or so years acquiring companies they deem worthy to make up the fabric of the fabled house of mouse. It would be impossible to look at just one acquisition made by them, as they’ve been lucky enough to pick up a horde of successful companies over the years.

Despite not being their most expensive acquisition by any means, the most important one was without a doubt Pixar in 2006. At the time, the move made Apple Chief Steve Jobs Disney’s largest shareholder and helped finally bring the two studios together, repairing a somewhat rocky relationship that they’d shared over the years.

This marked the beginning of a number of power moves from Disney who went on to purchase Marvel for $7 billion in 2009, earning back more than double what they paid in revenue in the following 10 years.

In 2015 Disney purchased Lucasfilm and have already recouped the $4 billion they paid through the release of new Star Wars films, and in 2019 they purchased 21st Century Fox for $71.3 billion. The Fox purchase gave Disney access to a vast media empire that included The Simpsons ahead of launching their hit streaming platform Disney+ in 2020.

Google and 236 companies

It wouldn’t have been right for us to put together this article without giving an honourable mention to Google. The Internet search giants have absolutely dominated for over two decades and have acquired well over 200 companies from the tech sector both big and small.

Surprisingly, their biggest acquisition was Motorola Mobility in 2011 for $12.5 billion. The buyout of the mobile production side of Motorola was done purely to beat rivals Samsung to the chase.

More notable acquisitions that you can quite clearly see the benefits of include Nest Labs, the company behind their smart home products, Smartwatch brand Fitbit, GPS Navigation software Waze and of course YouTube.

Having spent over $28 billion on their top ten acquisitions alone, it’s fair to say Google spares no mercy when it comes to eating up competitors and plucking potentially groundbreaking companies from relative obscurity in order to further develop their own products.

It’s going to be an interesting few years as Google continues to grow their global empire

What’s next in the world of big business?

It’s no secret that the world’s economy has taken a substantial hit in the last few months due to the ongoing COVID-19 pandemic that has gripped the world.

Naturally this has led to some companies requiring immediate investment in a bid to keep their businesses alive. However, mergers and acquisitions have dropped by 52% year-on-year globally and by an astonishing 83% in the United States due to disruption caused by the virus.

That said, a number of well positioned companies are still going ahead with large mergers and acquisitions as normal. In June, Amazon announced that they were acquiring Zoox for $1.2 billion, an ambitious tech start-up that has been developing self-driving vehicles.

World-renowned live casino game developer Evolution Gaming has made a $2.12 billion dollar move to purchase NetEnt, the world’s leading online slot game developer. The move represents an ambitious play from Evolution that would see them dominate the online casino industry and be well-placed for expansion into the growing United States iGaming market.

Elsewhere, Uber has acquired food delivery service Postmates in a $2.65 billion all-stock deal that will see them grow their delivery platform.

Ultimately, as bleak as the world’s economy may seem right now, there are companies out there that are thriving and aren’t afraid to splash the cash in order to further grow. It could well be argued that there’s no better time for mergers and acquisitions to take place, as prices have never been lower, new niche markets have appeared and companies need help.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes