Top 10 Business Mergers/Acquisitions of the Decade (Part 2)

Posted on 19. Jan, 2010 by Broadband in Business, Finance & Investments

In Part 1 we had the following mergers:

• AOL & Time Warner
• Pfizer Inc & Pharmacia Corporation
• Royal Dutch Petroleum & Shell Transport and Trading Co
• Chase Manhattan & JP Morgan
• Inbev Inc & Anheuser-Busch Companies Inc

Here’s the final 5 mergers as Pbleepd takes a look at the Top 10 mergers and acquisitions in a decade of up and down results

E.ON & POWERGEN

“Utilities and energy took centre-stage. Under pressure from the European Commission for more liberalisation and integration of national markets, and with competition between countries for scarce energy resources intensifying, the European Union’s energy market spent the next few years consolidating.” – Financial Times

Cue January 2002 when German energy corporation E.ON fully acquired UK based company Powergen. This was actually a move recommended by the Powergen Board who knew that a merger would enhance the company’s competitive position in the long run. With Powergen’s experience and expertise in international asset management, deregulation, environmental management and reporting, E.ON would be able to achieve it’s aim of leadership across the European energy market.

It was a fine example of two company’s combining the strength in buying power and strategic knowledge. (Something Hewlett Packard and Compaq were able to do when they merged in the same year)

E.ON has become the world’s largest privately-owned electricity and gas company

HSBC & HOUSEHOLD INTERNATIONAL

Welcome to another episode of “When Business Mergers/Acquisitions go wrong”

In 2003 the dotcom crash had given way to an explosion in lending and an unprecedented property price boom. HSBC were well on their way to becoming the world’s largest banking group; with business booming bosses at the bank decided to chase a slice of the booming US property Market.

HSBC acquired US lender, Household International; the idea was that the deal would enable Household to borrow more cheaply because of HSBC’s higher credit rating, leading to wider margins on loans to customers. A little research however would have turned revealed how unpopular Household was with many of its customers at the time.
“Household was a poor fit with HSBC’s operations as much of its business was in second-line mortgages, known in the US as piggyback loans, marketed to low-income homeowners who used the cash to buy anything from cars to conservatories” – The Guardian

50 million U.S. clients, many with spotty credit histories; losses were at an all-time high with recent reports showing that Household had lost the bank $30bn since 2006. Indeed the newly named HSBC Finance Corporation is ending its lending deal as of last year.

BANK OF AMERICA & MERRIL LYNCH

The latter part of the decade saw bankruptcy’s from leading banks (Lehman Brothers). As they struggled to issue debt, several emergency rescue mergers were struck. In the UK Lloyds TSB took over HBOS for $21.9bn but the biggest take over at the time took place in the US when Bank of America saved Merril Lynch.

In 2008 Bank of America acquired Merril Lynch for $50bn making them the largest financial services company in the world. With 20,000 stockbrokers worldwide and $2.5 trillion in client assets it is the world’s largest brokerage. Merrill Lynch both enhances current strengths at Bank of America and creates new ones, particularly outside of the United States.

Merrill Lynch adds strengths in global debt underwriting, global equities and global merger and acquisition advice. After the acquisition, Bank of America would be the number one underwriter of global high yield debt, the third largest underwriter of global equity and the ninth largest adviser on global mergers and acquisitions.

“The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,100 retail banking offices, more than 18,500 ATMs and award-winning online banking with more than 25 million active users.

Bank of America offers industry leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries and has relationships with 99 percent of the U.S. Fortune 500 companies and 83 percent of the Fortune Global 500” – Bank Of America

EBAY& PAYPAL

Sometimes the best way to stomp out competition is to buy the competition. In 2002 Ebay stopped using it’s own Billpoint payment system and acquired PayPal for $1.5bn. PayPal who allow consumers to purchase goods online without a credit card, had most of it’s profit via Ebay auctions prior to this so the merger was inevitable.

The PayPal acquisition helped both customers and the company’s bottom line by speeding up the payment process. Buyers and sellers complete transactions days faster using electronic payments. “PayPal is the ‘gorilla’ in the online payment market, as eBay is the ‘gorilla’ in the online auction market,” Merrill Lynch analyst Justin Baldauf

Now both companies sit on higher profit from a relatively cheap (ish) takeover. Something that Walt Disney and Marvel will try to emulate Im sure

ADIDAS & REEBOK

Though Adidas had global dominance (especially in Europe and Asia) it was actually Reebok who profited more in the North American Market; however they were still well away from the power of Nike. Then in 2006 Adidas announced a $3.8bn acquisition involving the world’s second- and third-biggest sports goods companies.

It was a move encouraged by all as Nike further stake their claim as the number one sports shoemaker and leading sports brand in Hip-Hop Culture. With Nike partnering with designers and record labels for special-edition sneakers and acquiring Converse in 2005 it was imperative for Adidas and Reebok to get themselves involved in young culture to catch up.

Reebok and Adidas have been targeting NBA players and hip-hop artists for endorsements and product identity co-branding. Adidas has a successful line of shoes and apparel going with singer Missy Elliott, while Reebok’s lines built around rap stars Jay-Z and 50-Cent are outselling shoe lines developed around its National Basketball Assn. stars.
They do however strike an advantage by reaching out to the older market with Adidas concentrating on upper-end performance shoes, while Reebok covers the middle-priced market.

Together they have forged formidable force whom Nike should be considerably aware of

Source

http://newsroom.bankofamerica.com/index.php?s=43&item=8255

http://www.eon-uk.com/about/1053.aspx

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqP4Jt4H2UpU&refer=home

http://www.guardian.co.uk/business/2009/mar/01/hsbc-us-sub-prime-deal

http://www.businessweek.com/bwdaily/dnflash/aug2005/nf2005084_8340.htm

Tags: Highlight