The 3 Top Mergers of All-Time

Mergers and acquisitions (M&A’s) can be quite a process for the companies involved, but when well-planned and properly executed, mergers can achieve great success, with plenty of examples to prove it.

That being said, there is no denying the risk accompanied with mergers and acquisitions. Research shows that more than half of all mergers fail. But often the failures are the result of poor planning, high valuations, and lack of well-understood value drivers, according to an article published by Forbes

It’s important to realize why M&A’s are happening in the first place. The same article touches on the two primary motivations for making acquisitions. The first is to fill a strategic gap in the company’s product, resources and capabilities. The second is to help the company enter a new market. According to the author, everything else, things like reducing taxes and economies of sale, should be secondary.

Intuitively, its instructive to consider examples of M&A success, and the corollary, failures—this to understand best practices, and avoid potential problems. CNBC published the ”Top 10 Best (and Worst) Mergers of all Time”. Following are three of the best mergers of all-time:

  1. Disney and Pixar

Mickey and Nemo. Pinocchio and “Toy Story.” Cinderella and “Cars.” The merger of legendary Walt Disney and everything-we-create-kids-adore Pixar was a match made in cartoon heaven. Disney had released all of Pixar’s movies before, but with their contract about to run out after the release of “Cars,” the merger made perfect sense. With the merger, the two companies could collaborate freely and easily.

Did the merger work? Well, take a look at the successful movies that Disney and Pixar have put out since: “WALL-E,” “Up,” and “Bolt.” Pixar has plans for twice-yearly films, unthinkable before the merger, and has certainly gained the expert advice from Disney when it comes to advertising, marketing plugs, and merchandising.

When it comes to marketing to children, no one does it better than Disney. Even pre-merger cartoon “Cars” got the Disney treatment and remains a top seller in merchandising among 4-year-old boys.

2. Sirius and XM Radio

On July 29, 2008, satellite radio officially had one provider when Sirius Satellite Radio joined forces with rival XM Satellite Radio. The merger was officially announced more than a year before, in February 2007, but the actual merger was delayed due to one tiny problem — when satellite radio first began in 1997, the FCC granted only two licenses under one condition: that either of the holders would not acquire control of the other.

Oops.

So Sirius and XM filed the proper paperwork with the FCC, allowed the FCC to investigate the merger, and waited patiently for the approval they needed. And although time will tell if the new Sirius XM company will succeed in the long-run, this merger is a success due to the number of big names recently added to their roster (Oprah, Howard Stern, Martha Stewart), as well having the foresight to combine forces in a down market.

3. Exxon and Mobil

Big oil got even bigger in 1999, when Exxon and Mobil signed an $81 billion agreement to merge and form ExxonMobil. Not only did Exxon Mobil become the largest company in the world, it reunited its 19th Century former selves — John D. Rockefeller’s Standard Oil Company of New Jersey (Exxon) and Standard Oil Company of New York (Mobil). The merger was so big, in fact, that the FTC required a massive restructuring of many of Exxon and Mobil’s gas stations, in order to avoid outright monopolization (despite the FTC’s 4-0 approval of the merger).

ExxonMobil remains the strongest leader in the oil market, with a huge hold on the international market and dramatic earnings. In 2008, ExxonMobil occupied all ten spots in the “Top 10 Corporate Quarterly Earnings” (earning more than $11 billion in one quarter) and it remains one of the world’s largest publicly held companies (second only to Walmart).

These examples of great mergers show the possibilities and success of well-executed strategies. While these examples are all very large companies, Mergers and acquisitions are possible for any size of company and, as previously mentioned, offer a wide array of benefits.

AchieveNext offers M&A services for middle market organizations of all sizes, private or public. From due diligence, to capital planning, AchieveNext has skilled consultants located in key markets across North America.

For more information, check out our M&A Readiness Services page.


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