In the finance world, mergers and acquisitions (M&A) are often compared with marriages. Both these developments take place after deliberations and careful negotiations, and ironically, M&As, much like marriages, sometimes fall apart. The latest case of a deal gone sour is that of Twitter.
On Friday, billionaire Elon Musk terminated his $44 billion deal to buy Twitter after the microblogging site failed to provide information on fake accounts sought by the Tesla CEO. In response, Twitter's chairman Bret Taylor said he will take legal action to ensure that the merger agreement goes as planned.
While the recent Twitter controversy has become the talking point across the world, several big-ticket M&As have gone wrong earlier as well. Before going into previous such deals, let's understand the difference between a merger and acquisition. An acquisition is when company A purchases a controlling percentage of shares (or all shares) of company B. Meanwhile, a merger is two entities coming together to form a new entity.
Here's a rundown of the M&As gone wrong
Google and Motorola: On paper, the deal made perfect sense. Google made the Android operating system and Motorola was a giant player in the mobile handset market. However, Motorola couldn't keep up its part of the deal, as per Google. In fact, Google officials thought so poorly of new Motorola handsets that they contacted Samsung and LG to develop its Nexus handsets.
ALSO READ | Twitter vows to fight back Elon Musk in court as Tesla CEO backs out of $44 billion deal over bot accounts
Microsoft and Nokia: Once the world's biggest handset manufacturers, Nokia and technology giant Microsoft came together to make smartphones that ran on the Windows operating system. However, we all remember how that went down. Nokia, the Finnish company, which dominated the world in the feature phone era, failed to keep up with developments in the smartphone age. Consequently, Microsoft had to write off $7.6 billion and lay off over 15,000 Nokia employees.
eBay and Skype: eBay’s acquisition of Skype was based on the idea that buyers and sellers on eBay would be able to communicate through Skype. Another idea that made perfect sense on paper. However, the two companies failed to realise that people don't want to video call strangers, especially when they can do the transaction through texts or emails. After four years of the deal, eBay ended up selling two thirds of Skype for $1.9 billion.
Reliance Communication and Aircel: In a bid to deal with the huge debt (Rs 958 crore at the time), Anil Ambani-led Reliance Communication entered into discussions about a merger deal with Aircel. The officials of the two companies said that the merger would help them survive the highly competitive telecom market and make better use of infrastructure. However, the deal was called off mutually due to several reasons, including opposition from creditors, high taxation, time-consuming process and others.
HDFC and Max Life: At the time when this merger was being considered, HDFC was a private company and wanted to get listed. A merger with Max Life, the largest private insurance company back then, would have meant automatic public listing for HDFC without going through the cumbersome route of an initial public offering (IPO). However, the proposed merger was not approved as Section 35 of the Insurance Act bars the merger of the insurance company with non-insurance companies.
(Edited by : Sudarsanan Mani)
First Published: Jul 9, 2022 1:00 PM IST
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