By virtue of their very nature, large conglomerates have all conducted M&A at some stage in their past.
Conglomerates are usually defined as a multi-industry company, and they’ve invariably become multi-industry through acquisitions.
Some of the biggest conglomerates in the world are now the companies that come up in everyday conversation: Mars, P&G, Nestle, Philips, General Electric and more. Below, we look at the ten largest mergers and acquisitions ever made by conglomerates.
Examples of the most successful conglomerate mergers
1. Berkshire Hathaway and Precision Castparts merger for $37B in 2015
Inevitably, Warren Buffett’s acquisitions occupy several places on this list and his biggest deal of all came in 2015, with the acquisition of this manufacturer of parts for the aerospace industry.
Interestingly for Buffett, who is famed for his value investing, Precision Castparts was acquired for a multiple in excess of 20 times earnings, a price that included a 20% premium on the share price.
2. United Technologies and Rockwell Collins merger for 30B in 2017
When United Technologies acquired Rockwell Collins in 2017, it led to a series of spin offs, including that of Otis Elevators, a well-known name in consumer tech that left the conglomerate’s portfolio.
Interestingly, the deal is the second aerospace merger in the top three positions, suggesting that it is a focus industry for conglomerates. Despite the deal allowing United Technologies to become a so-called “mega supplier” for Boeing, shareholders were not impressed, with the stock falling to its lowest price in 2 years affer the deal was made public.
3. Berkshire Hathaway and Burlington Northern Santa Fe for merger $27B in 2009
When Berkshire Hathaway acquired Burlington Northern Sante Fe, Warren Buffett said:
“our country’s future prosperity depends on it having an efficient and well-maintained rail system.”
That must have been what he saw in BNSF, the largest acquisition in history for Berkshire Hathaway at that time. The subsequent growth of BNSF’s business, nearly double what it was at that time, appears to have justified the enormous outlay.
4. Berkshire Hathaway and Heinz for $23.3 in 2013
This acquisition is interesting because it paved the way for Heinz to merge with Kraft to create what’s known today as Kraft Heinz, a behemoth in the global food industry. Of the two, Berkshire Hathaway has admitted that Heinz (in which it entered into a partnership with Brazilian private equity firm 3G) was a much better purchase.
The deal also shows the power of conglomerates in several industries: Berkshire Hathaway owns Kraft Heinz and is the largest shareholder in Coca-Cola, among other well-known food brands.
5. Mars Inc. and Wrigleys merger for $23B in 2008
Readers familiar with the mechanics of this deal will recall that it is yet another that Berkshire Hathaway could justifiably claim to have an involvement in.
The conglomerate provided Mars with the financing to acquire Wrigleys in 2008 – at a time when most financial institutions were finding liquidity hard to come by. The deal was a match made in heaven – one of the world’s largest confectioners adding the world’s largest chewing gum brand to its portfolio.
6. United Technologies and Goodrich Corporation merger for 18.4B in 2011
The acquisition of Goodrich Corporation by United Technologies in 2011, allowed UTC to merge its new acquisition with an existing firm in its portfolio, Hamilton Sundstrand, to create a new unit called UTC Aerospace Systems.
At the time of the acquisition, the company’s CEO said the acquisition was “transformational,” which is a bold statement given how often conglomerates tend to make acquisitions. However, the deal may have paved the way for the even bigger acquisition of Rockwell Collins just six years later (see no. 2 on this list).
7. Siemens AB and Varian Medical Systems merger for $16.4B in 2020
Siemens has increasingly invested in medical technology over the past decade through its Siemens Healthineers arm.
The acquisition of Varian in 2020 gives it a leading position (and strong portfolio) in the fight against cancer. Before the acquisition, Varian was considered a world leader in radiotherapy technology and multidisciplinary cancer care. The acquisition valued Varian, a company based in Paolo Alto, at a 24% premium to its listed price.
8. Berkshire Hathaway merger for Gen Re for $16.2B in 1998
Insurance and reinsurance companies have traditionally been targets for Berkshire Hathaway because they provide investors with fast access to liquidity, creating good reinvestment opportunities when they’re available.
The conglomerate already owns several well-known insurance companies like GEICO, creating huge synergies in their portfolio between the companies. However, in a rare error of judgement, the company paid for General RE with its own shares rather than cash. The same stock is now worth close to $100 billion.
9. Danone and Numico merger for $13B in 2007
When Danone bought Numico in 2007, it paid a significant 44% premium over its listed price. The deal marked its first foray into baby foods, an area that it has made several acquisitions in subsequent years. Numico is the manufacturer of well-known consumer brands in the baby food space such as Milupa and Cow & Gate.
It also provided the firm with a launchpad into higher growth as its existing line of products, which included Evian spring water and Activia yoghurts, had seen sluggish growth for a few years before the transaction.
10. 3M and Acelity merger for $6.7B in 2009
3M is a company that has never been afraid to move into new spaces. When it stumbled upon the Posit concept, instead of backing away from the inherent opportunity, it commercialized it into a billion dollar product.
The maker of Posits is also a maker of wound dressings, so it made sense to acquire Acelity, a maker of wound dressings and other products to stop bleeding, in 2007. The acquisition served to make 3M the world leader of this niche.