One of the factors that makes acquisitions such a fascinating area of finance to study is that, while all transactions are relatable to some extent, no two deals are the same. Every M&A transaction has at least some takeaways.
We, at DealRoom, help companies organize their M&A process and here we look at 11 well-known acquisitions, analyze the key takeaways, and provide some pointers on how companies have utilized these acquisition strategies in each particular case.
Examples of Acquisitions
The motive for one company to acquire another is nearly always growth, although there is some contention around this issue; how does one measure the growth generated by the acquisition? Through event studies that look at the movement of the acquiring company’s stock price? Or income growth?
These are the questions that keep M&A industry onlookers in business.
In the next section, we look at some of these issues in more detail. Here are the 5 common acquisition type examples:
Example #1 – The acquisition as part of a roll up strategy
Salesforce is an example of a company that has made acquisitions a central part of its growth strategy.
Its acquisition of Slack for $27.7 billion in July 2021 was made after the company realized that the workplace had changed forever as a result of the Covid-19 pandemic.
However, as the graphic above illustrates, the Slack acquisition is just one of many that have allowed the company to become a leader in the workplace technology space.
Example #2 – The acquisition to enter a new geography
Spanish bank Banco Santander has also adopted a roll up strategy of sorts, where the emphasis is on geographic expansion. Banco Santander didn’t let Spain’s relatively small population of less than 40million people at the time its acquisition spree began, to limit its growth prospects.
It looked to the Latin American and later, European markets, where cultural and economic links gave it an advantage.
An example of an acquisition (or series of acquisitions) to enter a new geography is well exhibited by Banco Santander’s acquisitions in Argentina.
To enter the market, it acquired a series of small bank entities, starting in Argentina. In 1963 they bought Banco del Hogar Argentino and in the next four years Banco Mercantil de Rosario y de Santa Fe, and Banco Comercial eIndustrial de Córdoba. In 1996, it acquired Banco Tornquist, cementing itself as the largest private banking entity in Argentina, a market with more banking consumers than Spain, according to Statista.
Example #3 – The synergistic acquisition
Morgan Stanley’s acquisition of E*Trade could be considered a synergistic acquisition or an acquisition aimed at acquiring technology, as there is considerable overlap.
However, from the synergies perspective, the $13billion deal allows Morgan Stanley to tap into $56 billion of low cost deposits, data about millions of E*Trade’s customer base, and a powerful new tool to add to Morgan Stanley’s existing portfolio.
Here is a helpful visualization of value captured by synergies and synergistic acquisitions.
Following is growth of Morgan Stanley’s share price since its acquisition of E*Trade.
Here is a helpful visualization of value captured by synergies and synergistic acquisitions.
Example #4 – The acquisition to acquire technology
Despite closing hundreds of small add-on technology acquisitions, Google (or Alphabet, as it’s now officially called) made what is widely regarded as its best acquisition nearly 20 years ago.
The acquisition of Android in 2005 for $50 million, enabling Google to enter the cellular phone market for the first time.
To say that the acquisition was a success would bean understatement: in 2020, the Android operating system was the operating system operating in over 70% of the world’s mobile technology, with this figure reported to increase in the following years.
Example #5 – The acquisition to extend the product line
The Coca-Cola fridge is instantly recognizable worldwide, but its contents have continued to change over the decades in response to consumer tastes. In 2015, recognizing a global thirst for energy drinks, the Coca-Cola company went looking for a popular energy drink to bolster its portfolio.
It acquired a stake in energy drink business Monster – the world’s second largest selling energy drink after Red bull – for $2.15bn, allowing customers to open that fridge and take out a cola, a lemonade, an orange, water, juice or an energy drink, which are all amongst Coca-Cola’s product and brand portfolio.
Such is the power of an acquisition that extends a company’s product line.
The 6 largest corporate acquisitions in history
We have established some of the different types of acquisitions, but what about the deals whose implicit intention is to reshape industries?
These multibillion dollar deals are the ones that grab the most headlines and more often than not, attract the attention of anti-monopoly regulators concerned that the transaction may lead the acquiring company to wield too much power in their industry.
Below, we look at the six biggest acquisition deals of all time and some of the implications of each.
1. Vodafone and Mannesmann AG – The biggest acquisition of all time
It has been over two decades since Vodafone acquired Mannesmann AG, for $200 billion, still the largest acquisition of all time.
The deal created the world’s largest mobile phone operator, which is still a leader in most European markets, as well as several outside of Europe.
DealRoom looked at the implications of the deal in a previous article about the largest M&A deals of all time. Incidentally, the deal is also considered to be the largest hostile takeover of all time.
2. Heinz and Kraft Foods – The biggest consumer goods deal of all time
The biggest consumer goods deal, like many of the biggest, was considered more a merger of equals than an acquisition per se. When the $100 billion deal was announced in 2015, it made everyone in the already highly consolidated food industry – think P&G, Mars, Nestlé, Danone, and others – sit up and take notice.
However, despite creating one of the world’s undisputed giants of the food industry, the deal wasn’t considered a success, and was followed by slumping sales, shareholder lawsuits, and even shadows hanging over the firm’s accounting practices.
3. China Guodian and Shenhua Group – The largest deal involving a state owned enterprise (SOC)
Here in the United States, we’re not accustomed to the government becoming involved in the M&A scene (with the notable exception of some interventions around the time of the 2008 financial crisis).
However, in China, this is common fare, and some of the deals – largely unknown here in the west – have been astronomically large.
The biggest of these was the merger between China Guodian Corporation and Shenhua Group, creating what is thought to be the largest coal producer in the world with assets of just under $300billion.
4. Philip Morris and Altria – The largest deal which failed to close
Sometimes, it’s not the transaction that closes, but rather the one that didn’t and makes you wonder what might have been, that’s most fascinating.
In 2019, tobacco industry giants Altria and Philip Morris came close to signing a $202 billion deal that would have an epoch-defining and probably epoch-ending (there cannot be many big deals left in the tobacco industry) transaction.
Ultimately, the deal failed to close because of a lack of investor interest on both sides, and a storm brewing over issues related to vaping, where Altria has a large stake in one of the industry leaders.
5. Exxon and Mobil – The deal that created the largest company in the world
On November 30, 1999, as the United States entered the last month of a century in which the antitrust commission had spent much of its time separating large oil companies, two American oil giants, Exxon and Mobil, announced a merger that would not only create an industry leader, but the biggest company in the world by market cap.
The $73 billion deal enabled the two companies to react better to movements in crude prices, and is thought to have gotten the green light from anti monopolists in a bid to protect America’s energy interests.
6. Rosneft and TNK-BP – The largest ever emerging market acquisition
What’s notable about the lists of the largest M&A deals over the past 50 years or so is how few countries were involved outside of the United States, Canada, and a few European countries, until the beginning of this century.
That has started to change quite rapidly with giants from emerging market companies now competing on the world stage. The biggest deal to date involving these companies was the acquisition of TNK-BP by Russian oil giant Rosneft in 2013 for a fee of $55 billion, creating yet another Russian national champion in the oil and gas industry at the time.
In a way, ’mergers and acquisitions’ is a catch-all term for different types of acquisitions that can involve anything from SMEs to massive state owned enterprises, from businesses operating the same industry to those operating in seemingly completely unrelated areas, and from the same city to deals involving countries on the other side of the world.
What every single one has in common is a desire for corporate growth.
In this article, we covered the best 11 acquisition examples that taught us everything there is to know about acquisitions. Learn more about the largest 13 Largest M&A Deals of all Time and check out our Guide to Mergers & Acquisitions.