06/07/13 at 2:01 am
The words ‘‘merger’’ and ‘‘acquisition’’ are interchangeable. If the two terms are to be distinguished, then a merger occurs when two or more firms are voluntarily combined under common ownership, while an acquisition, or takeover, occurs when one firm acquires or buys the assets of another without the agreement of the controllers of the target company. The three types of mergers are horizontal, vertical and conglomerate. Types of mergers will vary according to the nature of the industry and the degree of fragmentation.
The motives for merging are different in managerial and owner-controlled firms: the former may be more concerned with increasing the growth rate of the firm, while owners are presumed to be more concerned with increasing profits or shareholder value. These mergers and acquisitions act as main sources of economic gain which enable firms to achieve higher growth and/or higher profitability through the pursuit of mergers are the same.
The world of business has seen some of the most successful and disastrous mergers and acquisitions to date. In this article, we put light on some of these mergers and acquisitions which caught the eye of the world.
Disney and Pixlar had collaborated for years. This collaboration gave birth to few of animations greatest characters like Nemo, Mickey Mouse, Pinocchio, and Cinderella. Being parents to these animated movies, it was only logical for these two powerhouses to come together as one. After their contract was due to expire, the proposal was considered. It initial hit some hitches, as Steve Jobs, who was the leading shareholder of Pixlar, and Disney CEO Michael Eisner had their differences. However, in 2006, the merger went through. This merger made Steve Jobs the biggest shareholder of Disney, owning 7% of its shares. Ever since the merger, they have produced movies like WALL-E, Up and Bolt, which iterates how the merger led to both these firms making the best use of one another.
Oil Companies are usually large corporations, but when two such huge oil companies come together as one, what do we have? We have, at our hands, the world’s largest company. Yes, ExxonMobil is the world’s largest company in terms of revenue. This multi-national oil and gas corporation was formed by a merger between Exxon and Mobil, both of which were parts of John. D. Rockefeller’s Standard Oil. In 2008, ExxonMobil sat on all the ten places in the “Top Ten Corporate Quarterly Earnings”, with quarterly earnings exceeding $11 billion. Today, ExxonMobil’s influence is unlike that of any other corporation. It has influence on the foreign policy and on other parts of the government.
When the banking giant Citicorp and financial services conglomerate Travelers Group came together to form the company we know as ‘Citigroup,” the result was a formation of a company which would be the Exxon-Mobil of the financial sector. The merger was estimated to be worth around $70 million, with the new company having $700 billion in assets. This merger made Citigroup the number one financial services firm in the world. Today, it possesses the world’s largest financial services network, covering 140 countries with nearly 16,000 offices across the globe.
4.Glaxo Wellcome PLC-SmithKline Beecham PLC
In 2000, the pharmaceutical industry saw two of its biggest players team up to become the largest drug manufacturer in the world. The net worth of the resulting company, which is known ever since as “GlaxoSmithKline”, was $130 billion. Today, it is world’s 4th largest drug manufacturer and has also put feet into diversification. It offers nutrition products, oral healthcare, over-the-counter medicines, and many more. Some of the most popular products include the likes of Horlicks, Lucozade, Sensodyne, Gaviscon and such popular household names. Although the new company, GSK, is only 12 to 13 years old now, the history of its forming companies dates back to centuries. An interesting fact to know is that both the forming companies were also results of different mergers.
5.Vodafone AirTouch-Mannesmann AG
In 1999, Vodafone’s interest in Mannesmann AG was at its peak. This interest was amplified by Mannesmann AG’s takeover of Orange, the UK mobile operator. After having its initial, unwanted bid rejected, Vodafone surged forward in its attempts to take over the German mobile network company. This endeavor of Vodafone to acquire Mannesmann AG gained public attention. The reason was not only its $200 billion valuation, but the fact that it incited protests in Germany. In normal circumstances, we would expect a company to give up the pursuit. However, this was no normal instance. When Mannesmann AG took over Orange, it was still working with Vodafone. Taking over Orange put Mannesmann and Vodafone head to head and thus, enflamed more reasons to be unwavering in their pursuit. Eventually, they made an offer the German company could not help but accept.
6.NationsBank-Bank America Corp
The Bank of America, as we know it today, is a result of a merger between NationsBank and Bank America, which came through in 1998. It was then, the biggest bank merger in the history, with the figure being around $64 billion. The colossal size of the merger led to the regulatory authorities being concerned about monopolistic dangers. As a result, federal regulators asserted that 13 branches must be separated in New Mexico, especially in towns where there would be no choice of banks after the merger goes through. Since then, Bank of America itself has come a long, long way. It has established itself as the largest bank holding company in the US, and the second largest bank when ranked by market capitalization. In 2008, after the global financial crisis, Merril-Lynch took over The Bank of America. This made Bank of America the largest wealth management company in the world and firmly instituted roots in investment banking.
7.Royal Dutch Petroleum-Shell Trading & Transport
These two oil companies have been allies for almost a century. They teamed up against the gigantic likes of Rockefeller’s Standard Oil, back in the days, and yet again teamed up in 2004, with 60% control going to Royal Dutch Petroleum, while Shell took the rest of 40%. The merger was estimated to be worth $75 billion. The name to the newly formed corporation was called “Royal Dutch Shell”. The interesting feature about this merger is the fact that although Shell received less of controlling powers, the influence it had in this relationship was overwhelming. This is why we know “Royal Dutch Shell” as just “Shell.” It is world’s second largest company in terms of revenue, and also is one of the 6 oil and gas superpowers. Truly, when the giants of oil and gas industry come together, what they form is absolutely enormous. Today, Royal Dutch Shell is one of the world’s most prestigious and recognized corporations.
One of the most famous broadband and communications companies of today, Verizon, was only formed in 2000. Before that, it was two different companies, GTE and Bell Atlantic. What was considered as a merger of two equals, was estimated to be worth $53 billion. What fueled this merger was AT&T’s acquiring of Tele-Communications Inc. GTE’s wireless operations was transformed into Verizon Wireless, making it the nation’s largest wireless company, until Cingular Wireless took over AT&T Wireless, in 2004. Almost five years after the GTE-Bell Atlantic merger, the combined company, Verizon, would go on to acquire MCI Inc., which would make Verizon U.S’s biggest telecommunications company of the time.
9.Daimler-Benz AG-Chrysler Corporation
Daimler AG, which is the world’s 13th largest car manufacturer and 2nd largest truck manufacturer, was previously known as DaimlerChrysler AG. This name dates back to 1998, when the German automobile company, Daimler-Benz AG merged with American automobile manufacturer, Chrysler. According to reports, Daimler-Benz took over 92% of Chrysler, which lead to accusations on the management’s statement, which called this ‘a merger of equals.’ These investors argued that it was more of a takeover than a merger, and they had a point. Nonetheless, Daimler-Benz and Chrysler Corporation had come together to form DaimlerChrysler AG. The aim was to make a dominant trans-Atlantic car manufacturing giant. However, a merger which was worth $37 billion did not even last for 10 years and was broken. As a result, Chrysler was sold for a meager amount of $7 billion, which was less than 20% of the worth of the merger. What surged on this corporate divorce is widely considered to be a corporate culture clash. That, with a recession at hand, led to the sinking of one of the biggest mergers in automobile industry.
10.AOL and Time Warner
Lastly, we have the biggest merger in U.S history. This was a merger between the internet service provider America Online and media giant Time Warner. The merger was worth about $165 billion and promised a future of endless possibilities. The merger was expected to act as an epitome of synergy, as both businesses complemented each other. However, fate had other plans. The merger turned out to be a disaster. After the dot com bubble burst, the companies realized that they had made a mistake in merging with each other. Losses piled-up and hit the peak which had an astounding figure nearing the $100 billion mark. In 2009, about 9 years after the merger, the companies decided to demerge and act as independent companies. It is considered the biggest blunder in corporate history, by many analysts and business figures.
In the corporate world, mergers and acquisitions have been around for a very long time. It is an ongoing process, which allows two different companies to fuse into one. While the regulatory authorities keep their eyes open to avoid any threat of anti-competition and monopolistic threats, their formation has seen to lead to gigantic corporations with influence beyond the boundaries of the corporate world. Small companies, which show potential are usually targets of large corporations who prey on them. It is nothing new and will probably continue to happen in the future too.
Throughout the history, there have been innumerable mergers and acquisitions. However, these ten are the most famous mergers and acquisitions, which really caught attention of the entire world.