Today’s highly competitive business world puts much more challenges for the business organizations due to the limited size of the market and an increasing number of businesses; competition is getting tougher. Mergers and Acquisitions are the two most common tactics for survival and facing challenges in this situation and widely used since the Wall Street crash of 1929.
Merger and Acquisitions
A merger is an agreement for making a union between two existing business organizations for forming a new one. Mergers share mutual benefits through shared resources, knowledge, experience.
The acquisition is the process of acquiring a company’s 50% or more than 50% stocks and assets to gain control of that Company in decision-making and operations.
10 Biggest Mergers and Acquisitions
As merger and acquisitions have been a great strategy, it has been utilized by many companies. We have made a list of 10 largest mergers and acquisitions which are elaborated below.
Verizon’s Acquisition of Vodafone
As of now, one of the most substantial acquisitions in the business world is the Acquisition of British multinational telecommunication company Vodafone’s 45% stake of Verizon Wireless to American multinational telecommunication giant Verizon Communications. Under this acquisition, Verizon paid 130 billion dollars in both cash and stocks. Under the project River, two companies completed their part of the deal.
The reason for this acquisition from Verizon's perspective is greater financial stability, enhanced operational stability, innovation, and access to the European market. In Vodafone's case, the reason is to pay down debt load, enhance its European operation, and provide financial strength to launch a new project called "Project Spring" (www.reuters.com/article) (www.bbc.com/news)
The Merger of Dow Chemicals and DuPont
The biggest chemical company in the USA, Dow chemicals, merged with another biggest chemical company DuPont in 2015. Under an agreement of 68.6 billion dollars, this merger formed DowDuPont with a combined market value of 130 billion dollars. The united DowDuPont planned to split into three different companies. These three new companies would focus on different sectors of agriculture, material science, and specialty products.
The reason for this biggest merger was to launch three separate and strong companies with better market positioning using the advantage of reduced cost of operation. the Company has identified 3 billion dollars annual savings, transforming into an estimated 30 billion dollars market value. (corporate.dow.com/) (usatoday.com)
The Merger of United Technologies and Raytheon Technologies
The merger took place in 2019-2020 and was the biggest merger of the aerospace and defense sector in the world. The transaction value of this merger was 121 billion dollars. The deal was structured to balance the stock value of both companies as equal; both companies belong to the aerospace industry, while United Technology provides commercial planes with electronics and communication equipment. Raytheon works for the US government armed forces and produces missiles and military aircraft.
The reason for this largest merger is the mutual benefits of both companies; At the same time, this deal allowed Raytheon to expand in the commercial aerospace industry; contrariwise, United Technologies benefited with reduced exposure in commercial aerospace clients. (www.reuters.com/article)
The Merger of Heinz and Kraft
The merger of two American food and beverage companies took place in 2015; the transaction value of this merger was 100 billion us dollars. While Krafts is famous for its dairy products, Heinz is famous for its ketchup. The Krafts and Heinz merger formed the third-largest food and Beverage Company in the USA and the fifth-largest food and Beverage Company in the business world. Krafts shareholders hold 49% of total stocks in the new Company, and Heinz shareholders hold 51%.
The reason for this merger is to use the advantages and brand value of these two giants collectively. While Krafts is famous for its products locally, Heinz has brand value globally. (www.businessinsider.com)
The Merger of Energy Transfer Equity and Energy Transfer Partners
Energy Transfer Partners is an American company engaged in transporting natural gas and propane pipeline. The Company merged with Energy Transfer Equity in 2018 and formed a new entity called Energy Transfer LP. The transaction value of this merger is 90 billion dollars. Because of some strategic advantages and mutual benefits, the CEO of Energy Transfer Partners planed this merger earlier.
The reasons include benefits of Tax Ruling from ETE, simplifying the organizational structure, and boosting the partnership's credit profile. (finance.yahoo.com)
The Merger of Warner Media with Discovery
Warner Media is an American entertainment, news, and sports media acquired by AT&T., and Discovery is an American mass media conglomerate company. Under a deal of merger, AT&T combined WarnerMedia with Discovery in 2016. The combined value of this merger is more than 150 billion us dollars, including debt.
The main reason for this merger is to build the biggest studio in Hollywood to compete with gigantic media companies like Netflix and Disney. (www.cnbc.com/2021)
Dell’s Acquisition of EMC
Dell, a world-famous computer maker, bought EMC Corporation for 67 billion dollars in 2015. EMC is a world market leading data-storage Company which provides cloud storage service software and networks for other corporations and organizations. Under this deal, Dell diversified its business portfolio from consumer pc making to fast-growing cloud-based data services.
The reason behind this acquisition is, in competition with Hewlett-Packard, Dell found this acquisition the best way to expand its business portfolio. The combination of Dell's server businesses with EMC's storage and virtualizing assets enlarged the horizon of Dell. (reuters.com\)
Merger of Unilever PLC with Unilever N.V
Unilever is the second biggest packaged food producer in the world. Since the beginning of its journey in 1929, the company was operating under its headquarters, one in the UK and one in Dutch.
This merger created a single company to achieve flexibility in business operation and further merger and acquisitions.
BHP Group Limited Acquisition of BHP Group plc
BHP Group is a multinational mining, metal, and petroleum and dual-listed public Company. Due to its to end this dual enlistment structure of this global resource giant, the board of the Company decided to end its activity in the UK by closing its enlistment in FTSE; the Company is the second-largest Company of FTSE by market capital and end of this dual enlistment will result in selecting Australia as the primary market. If everything works as planned and shareholders give approval, FTSE will lose the biggest mining company in the UK.
This unification is to end the dual enlisting structure of the Company. (www.reuters.com)
The Merger of Holcim and Lafarge
Switzerland-based cement-making company Holcim merged with French cement company Lafarge to make the biggest cement-making Company in the world to annually produce and sell 44 billion dollars worth of cement. This most extensive tie-up of the cement industry ends up in 53% stocks in the hands of Holcim Company’s side of shareholders. The new entity is based in Switzerland and enlisted in Zurich and Paris. The transaction value of this merger is over 60 billion US dollars.
This deal aims to improve performance in critical issues such as Operation cost, Debt, Market Competition, and weaker sector demand.
Bottom Line
Here, we have discussed the 10 biggest mergers and acquisition from the recent business history. Nearly every business sector was affected by the global epidemic of Covid 19. The increasing business competition made it difficult for organizations to survive with profitability. Mergers and Acquisitions are the best way to cope with this competitive business world as M&A offers a range of services and the flexibility to expand and reduce operational costs.
Bibliography
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- www.reuters.com/article. (n.d.). Retrieved from https://www.reuters.com/article/us-vodafone-verizon-idUSBRE97S08C20130903
- www.reuters.com/article. (n.d.). Retrieved from https://www.reuters.com/article/us-utc-m-a-raytheon/united-technologies-nears-deal-to-merge-aerospace-unit-with-raytheon-source-idUKKCN1T90T0
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