Published On: Thu, Aug 31st, 2017

List of Disastrous Recent Mergers and Acquisitions

Learn why mergers of top companies can have a bad outcome: a list of historical and recent mergers and acquisitions that hit the US business sector and brief overview of their case studies.

M&A Failures: List of Recent Mergers and Acquisitions That Didn’t Work Out Well

Mergers and acquisitions are generally good. History saw many cases where M&A did no harm. The advantages of mergers were tangible: they reduced financial risk, ensured a bigger market share and increased revenue.

Still, things are not always as perfect as executives wish them to be. Smooth mergers andideal synergy after said mergers do happen, but not each time. Far from it. Often, M&A causes quite a hassle and entails a long process of adjustment.

After all, acquisition is not only about signing the papers and starting to receive tons of income together. This areais abound with flops. To hit the ground running, you should set up one single workflow, preserve your brand identity (or work out a new one), define common objectives and the like. Otherwise, your deal can turn out to be a total disaster. Devastating and irreversible.

Case studies

Below you’ll find a list of mergers and acquisitions examples that’ve gone wrong.

America Online and Time Warner

The failure of failures. 15 years ago, two media behemoths, AOL and Time Warner, joined forces to form an entity that would soon be labelled as ‘the worst deal of all time’.

The top managers of thesetwo companies were striving to make fantastic profits in the prime of the Internet era. However, they met with some unexpected twists. By time all was resolved, the Dot.com bubble had gained weight and popularity. Andas soon as the merger was completed–the bubble burst.

The dot.com revolution hit the value of the company hard (specifically, its AOL division) and caused a terrible loss – equal to $99 billion. In the meanwhile, Internet-based advertising was picking up speed. AOL was missing trends one by one. For example, the company never even responded to the appearance of higher-bandwidth connections.
As a result, the Time Warner division known as AOL was completely forgotten.

The Snapple Beverage Company and the Quaker Oats Company

Another big corporate fiasco that hit the American market in the mid 90s. Back then Quaker Oats was proclaimed a food giant. Indeed, the company was one of the brands that dominated the industry. Pushed forward by high ambitions, Quaker Oats, the producer of Gatorade,bought Snapple for $1.7 billion and greatly overpaid.

The hopelessness of the decision proved itself almost instantly. The two brands just didn’t get along. They were ultimately very different. Creating a common brand identity was out of reach.

Gatoradehad a distinct athletic image and was being promoted as a high-energy drink for active people. Snapple, instead, was initially marketed as a New Edge beverage, before the merger,and was sold at gas stations and small convenience stores.

Quaker Oats completely messed the things up when promoting their newly acquired product. Starting with distribution, to general marketing techniques and going all the way to using inappropriate channels. The positioning was all wrong.

Eventually, Quaker had no other choice but to put Snapple up for sale. The price of the deal was $300 million.
Several times lower than the company had originally paid for it.

Sprint and Nextel Communications

When it all started, nobody knew the deal would be doomed from the very beginning. Spring and Nextel formed the biggest telecommunications provider known in the US. With their primary markets operating in slightly different sectors, the companies merged and each got access to new customer bases. This was the situation behind the deal and the main motivation – the expectation to sell their products to new clients.

Shortly after the merger had been signed, management started leaving the companies,referring to high incompatibility and a clash of cultures. Indeed, Spring and Nextel spoke different languages. Nextel excelled at customer service, while Spring was deaf to the client’s complaints. As a target company, Nextel often was waiting for approval from Sprint, which caused severe trust issues between the two groups of employees.

Eventually, the combination just didn’t work. The merger turned out to be a flop and entailed capital losses.
The story has a dramatic ending: Spring shares received junk status.

The New York Central and the Pennsylvania Railroad

Back in 1968, the USA witnessed one of the biggest and most ambitious mergers of all time. The New York Central Railroad and the Pennsylvania Railroad formed Penn Central. The deal was a real blast!Media was jumping the news, craving more and more details. You bet – Penn Central claimed the title of being the sixth largest corporation in the USA.

Two years passed, and a terrible, unexpected announcement shook the American business world. Penn Central went belly up, with the biggest bankruptcy the USA had ever experiencedup until that point. 118,000 shareholderswent bust. 100,000 creditors were affected.

Why did it happen? How did the largest deal of the decade became a flop? Before thisdisastrous merger, the two companies were thriving. The main reason behind the decision to merge was simply to strengthen the railroad industry. They never actually did manage to achieve their goal.

The reason for failure? Here come usual suspects – mismanagement and a clash of cultures. More mundane problems included different signaling systems and incompatible PCs. Furthermore, despite the absence of long-term planning Penn Central had inflated expectations.

A recipe for disaster.

To make things worse, the companies had been preparing for the merger for over 10 years.

What’s it all about?

M&Asare not executed in a blink of an eye. It’s a long, sometimes painful, process that requires a series of preliminary meetings and discussions.

Different processes, different cultures and different brands act as barriers. Executives should make these hurdles disappear, or brace themselves for failure.

About the Author

- Paul Linus is an eminent online journalist who has been writing news, features and editorials on different websites from across the world for about a decade.

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