Wealth Creation in the World’s Largest Mergers and Acquisitions: Integrated Case Studies PDF
Preview Wealth Creation in the World’s Largest Mergers and Acquisitions: Integrated Case Studies
Management for Professionals B. Rajesh Kumar Wealth Creation in the World’s Largest Mergers and Acquisitions Integrated Case Studies Management for Professionals More information about this series at http://www.springer.com/series/10101 B. Rajesh Kumar Wealth Creation in the World’s Largest Mergers and Acquisitions Integrated Case Studies B. Rajesh Kumar Institute of Management Technology Dubai, United Arab Emirates ISSN 2192-8096 ISSN 2192-810X (electronic) Management for Professionals ISBN 978-3-030-02362-1 ISBN 978-3-030-02363-8 (eBook) https://doi.org/10.1007/978-3-030-02363-8 Library of Congress Control Number: 2018959863 © Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Preface Mergers and acquisitions (M&As) represent a major force in modern financial and economic environment. Whether in times of boom or bust, M&As have emerged as a compelling strategy for growth. The modern day biggest companies have all taken its form today on account of a series of restructuring activities like multiple merg- ers. Acquisitions continue to remain as the quickest route companies take to operate in new markets and to add new capabilities and resources. The value of M&A deal rose from $200 billion in 1992 to about $4.74 trillion by 2017. The deal volume during the historic M&A wave during the period 1995–2000 totaled more than $12 trillion. This casebook clinically analyzes the wealth created in the world’s largest mergers and acquisitions in terms of deal value. This casebook focuses on integra- tive approach to examine all aspects of mergers and acquisition processes. The first chapter introduces the concept of mergers and acquisitions, processes involved, and strategic perspectives on mergers and acquisition. The chapter also aims for cross-fertilization in theory building and applied research by examining the linkage between mergers, acquisitions, and wealth creation. The following chapters discuss the largest mergers and acquisitions in terms of deal value and examine the wealth created by the merging firms. Another objective is to examine whether cor- porate performance has improved after merger or acquisition. The acquisition of Mannesmann by Vodafone was aimed to consolidate Vodafone AirTouch’s position in Europe. With the union, Vodafone and Mannesmann had controlling stakes in ten European markets, thereby giving the merged entity the most extensive European coverage for any wireless carrier. The merger between AOL and Time Warner created the world’s largest verti- cally integrated media and entertainment company. The merger was considered as one of the biggest failed mergers as the expected synergies between AOL and Time Warner never actually materialized. The acquisition of Verizon Wireless by Verizon Communications elevated Verizon’s position with leadership posi- tion in network performance, profitability, and cash flow. The combination of highly complementary portfolios of Dow and DuPont was intended to create leadership position for the combined company in the industry. In one of the larg- est transatlantic deals ever, Belgian-based InBev acquired Anheuser-Busch in a deal valued at $52 billion. The Kraft–Heinz merger resulted in the creation of the third largest food and beverage company in North America and fifth largest food and beverage company in the world. v vi Preface Pfizer has grown by megamergers and acquisitions. In the year 2000, Pfizer acquired Warner–Lambert for $111.8 billion. In the year 2003, Pfizer and Pharmacia merged to become a leading research-based pharmaceutical company in the world. During December 1998, Exxon and Mobil merged to become the third largest oil company in the world at the time of the deal. Citicorp and Travelers Group merged to create the world’s largest financial services company with banking, insurance, and investment operations in 100 countries. AT&T acquired Time Warner to become the premier integrated communications company in the world. In 2007, ABN AMRO was acquired by a consortium of banks known as RFS Holdings BV. This acquisition was aimed to create stronger businesses with enhanced market presence and growth prospects. The merger between Glaxo Wellcome and SmithKline created the world’s largest pharmaceutical company. Royal Dutch Shell acquired BG Group for US$70 billion. This acquisition cata- pulted Shell as the world’s second largest non-state oil company after ExxonMobil in terms of market capitalization. AT&T and BellSouth Corporation merged to emerge as an integrated provider in the wireless, broadband, video, voice, and data markets. In 2001, Comcast took over AT&T broadband unit for $72 billion. This deal created the biggest cable company in the United States with 22.3 mil- lion subscribers. JPMorgan Chase had grown through mergers and acquisitions over a period of time. In the year 2000, the Chase Manhattan Corporation acquired JPMorgan & Company in an all-stock deal valued at $30.9 billion. Charter Communications’ acquisition of Time Warner Cable and Bright House Networks created the second largest broadband provider and third largest pay- TV provider in the United States. In 2015, Actavis completed the acquisition of Allergan Inc. in a cash and share transaction valued at $70.5 billion. In one of the largest ever acquisition in the technology sector, Dell acquired EMC in a cash and stock deal valued at $74 billion. Altria Group had spun off Philip Morris International tobacco arm. In 1999, Vodafone Group Plc and AirTouch Communications Inc. merged to create one of the world’s leading mobile tele- communications group. Verizon Communications was formed by the merger of Bell Atlantic and GTE Corp. in one of the largest mergers in US history. British Petroleum merged with Amoco in a deal valued at $48.2 billion. US West had merged with Qwest. Qwest later merged with CenturyLink. WorldCom and MCI had merged in a deal valued at $37 billion. In the year 2016, Microsoft Corp. had acquired LinkedIn for $196 per share in an all-cash transaction valued at $26.2 billion. In one of the biggest acquisition, P&G had acquired Gillette in a deal valued at $57 billion. In one of the biggest hostile acquisition, Oracle took over PeopleSoft to become the world’s second largest seller of business applications software behind SAP. The Bank of America had undertaken a series of acquisitions as a part of its growth strategy. Gaz de France (GDF) was acquired by ENGIE SA in a reverse merger deal valued at €70 billion. In the year 2004, after a bitter takeover battle, France’s larg- est drug maker, Aventis, was acquired by a smaller rival company Sanofi- Synthelabo SA in a deal valued for € 55.2 billion. Bayer acquired Monsanto for Preface vii US$128 per share in an all-cash transaction. In 2009, Roche had acquired Genentech for $46.8 billion. The acquisition of Orange was a major step of France Telecom toward the strategy of internationalization to become European leader and global player. Merck and Schering-Plough Corp. merged in a deal valued at $41.1 billion. Zeneca and Astra had merged to form a new company called AstraZeneca in a deal valued at $67 billion. HP and Compaq had merged in a deal valued at $25 billion. WhatsApp was acquired by Facebook in a deal valued at $19 billion. The JDS Uniphase–SDL merger was valued at $41 billion. KKR acquired First Data Corp. in a deal valued at $29 billion. Lucent Technologies Inc., the top maker of phone equipment, bought Ascend Communications Inc. for $20.3 billion in stock for expansion into the fast- growing internet equipment industry. France- based Vivendi and its television subsidiary Canal+ had acquired Canada-based Seagram in a stock deal valued at $33.7 billion. In one of the biggest transatlantic mergers, German automaker Daimler- Benz purchased Chrysler for $38 billion. This merger turned out to be a colossal failure. In 2006, Mittal Steel announced a hostile bid for Arcelor. After a bitter struggle, the two companies merged to become the world’s largest steel company. Dubai, United Arab Emirates B. Rajesh Kumar Acknowledgment I would like to thank the production and editorial staff at Springer who guided this book through the publishing process. I wish to acknowledge the valuable guidance and support of Matthew Amboy, Senior Editor at Springer. My thanks go to Su Faith, Assistant Editor, and her team for all the cooperation and support for the pub- lication of this book. I also acknowledge the content of various websites and sources of information to which I referred. ix Contents 1 Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Vodafone Acquisition of Mannesmann . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3 American Online: Time Warner Merger and Other Restructuring . . 31 4 Acquisitions by Verizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5 DowDuPont Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 6 Mergers and Acquisitions by Anheuser- Busch InBev . . . . . . . . . . . . . . 69 7 Merger of Kraft and Heinz Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 8 Acquisitions by Pfizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 9 ExxonMobil Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 10 Citicorp–Travelers Group Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 11 AT&T–Time Warner Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 12 ABN AMRO Acquisition by RFS Holding . . . . . . . . . . . . . . . . . . . . . . . 131 13 GlaxoSmithKline Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 14 Acquisitions by Royal Dutch Shell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 15 Bell South Merger with AT&T. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 16 Comcast Acquisition of AT&T Broadband . . . . . . . . . . . . . . . . . . . . . . . 163 17 Key Mergers of JPMorgan Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 18 Charter Communications Acquisition of Time Warner Cable . . . . . . . 175 19 Actavis-Allergan Merger Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 20 Dell’s Acquisition of EMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 21 Altria Group’s Spin-Off of Philip Morris International Inc. . . . . . . . . 197 22 Vodafone AirTouch Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 xi
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