Throughout history, entrepreneurs have gambled on mergers and acquisitions, hoping that a savvy investment or deal will lead to vast profits.
Back in 1920, movie theater owner Marcus Loew bought Metro Pictures, Goldwyn Pictures, and Louis B. Mayer Pictures, to form MGM for a combined total of $8 million. This value amounts to about $108 million in today’s money, peanuts compared to the $5 billion a consortium led by Sony shelled out for MGM in 2004.
Even that sum is small change in 2016 though. In 2015 mergers and acquisition in the U.S. topped a mind-boggling $4.6 trillion. It seems buying up other companies is big business in its own right these days, as these recent blockbuster sales show.
5. Dow Chemical and DuPont (2015)
Last year, chemical industry giants Dow Chemical and DuPont announced their merger, which will be worth more than $130 billion when completed.
Both companies called it “a merger of equals” but this was a business deal borne out of necessity, designed to shore up their power. Both had recently been targeted by activist investors, as well as Wall Street hedge funds who wanted a quick buck. On top of that, a depressed market had seen profits fall in their sector.
The merger will give the newly-formed company up to $3 billion in cost-cutting savings, as well as a reduction in their tax bill, but will force significant lay-offs.
4. Verizon Communications and Verizon Wireless (2013)
In one of the more confusing takeovers of recent times, Verizon Communications completed the purchase of Verizon Wireless in 2013, in a deal which cost $132 billion. This was not technically an acquisition, more of a buyout, as Verizon Wireless was co-owned by Verizon Communications already, alongside British company Vodafone.
Vodafone decided to sell their 45% stake, and in the process made the largest U.S. wireless mobile carrier wholly American-owned.
The move consolidated Verizon’s position in the U.S. market and helped it add over 20 million subscribers in the two years that followed it.
3. Pfizer and Allergan, Plc (2015)
In late 2015, Pfizer Inc. announced it was to combine with Dublin-based Allergan, Plc to form Pfizer Plc. The $160 billion deal is the largest acquisition ever within the drug's industry and turned Pfizer into not only the biggest business in Ireland, but the largest pharmaceutical corporation in the world.
Though Pfizer bought Allergan, it was cleverly structured the other way round, so Pfizer Plc could be based in Ireland and enjoy the tax benefits this would allow. Pfizer valued Allergan at $363.63 per share, which was 27% mark-up on the company’s stock price on 28th October, just before negotiations became public. Though not yet approved by shareholders or regulators, the merger should be completed in the second half of 2016.
2. AOL Inc. and Time Warner (2000)
Every so often a company acquisition makes even the most casual observer stop and think. One of these moments came in 2000 when AOL bought Time Warner.
At the time, the $164.7 billion deal ($266 billion today) saw America’s top Internet service provider merging with the world’s top media conglomerate. The idea was to create a digital powerhouse, but things quickly went wrong. The dot-com bubble burst in 2001 and immediately hamstrung the company, and in 2002 Time Warner posted record losses of almost $100 billion.
By 2009 things were so bad that a demerger was announced. By then, Time Warner’s stock price had plummeted 90% from its pre-takeover level, and AOL’s stock had fallen from a high of $226 billion to just $20 billion.
Time Warner chief Jeff Bewkes later called the move “the biggest mistake in corporate history".
1. Vodafone Airtouch PLC and Mannesmann (1999)
In 1999, one of the ugliest takeovers in history played out over three months in Europe. British mobile network operator Vodafone (then called Vodafone Airtouch) launched a hostile takeover of German wireless company Mannesmann AG, which was rebuffed.
Two more offers followed, but Mannesmann seemed so against the move that they even opened talks with Vivendi, who they saw as a “white knight”, swooping in to save them from unwanted attention. Vodafone eventually upped their offer by 5%, and finally got their own way.
The acquisition was controversial in Germany, as a firm of Mannesmann’s stature had never been taken over by a foreign owner.
At the time, the deal was worth $202.8 billion, which was then a record. Adjusting for inflation, that’s now a staggering $287 billion, comfortably the most expensive company acquisition of all time.