Question

B- In light of your study of the course subjects and your readings through the Internet and/or the university e-library, Provide examples from the real world for successful and unsuccessful mergers and acquisitions cases in recent years and state the specific reasons behind their success or failure.

(Do not provide general reasons behind success or failure & only one example should be provided for each case).

Answer 1

Answer

Brief description of merger and acquisition

Mergers and acquisitions (M&A) is a general term used to describe the consolidation of companies or assets through various types of financial transactions. Using M&A strategy, company can grow their revenue and profits.

A M&A strategy can create synergies when companies with complementary products, services, and missions come together. However, an M&A strategy can also create tensions and failure when corporate cultures clash, or the acquirer fails to successfully integrate the acquired company's assets, systems, and brands.

An example of successful merger and its key reasons

On May 5, 2006 the two esteemed companies Disney and Pixar merged. Disney acquired shares worth $7.4 billion in Pixar and made it Disney’s subsidiary. Since then it has been reported as one of the most successful mergers of times.

Key reasons for the successful merger

The key reasons for the success of the merger of the two companies was that investors saw potential for Disney to leverage on pixar’s computer animated character to be used in its vast networks. One successful example was “cars”. The revenue in retail products from “cars” was over $5 million. Pixar’s willingness to change so as to be a part of the international conglomerate helped. Pixar not only developed new movies but also sequels of original ones. Executives also chained their minds of alternative production channels.

The transformational leadership at Pixar was brought to Disney. Their ability to lead and motivate employees in a way that they easily adapt to the dynamic environment was remarkable and Disney adopted it.

An example of unsuccessful merger and its key reasons

In 2005, eBay Inc. purchased Skype for $2.6 billion

Key reasons for the successful merger

The purchase price was extremely high considering that Skype had only $7 million in revenues. Meg Whitman, eBay's CEO, justified the acquisition by arguing that Skype would improve the auction site by giving its users a better platform for communicating.

Eventually, eBay's users rejected Skype's technology considering it unnecessary for conducting auctions, and the rationale for the purchase dissipated. Two years after the acquisition, eBay informed its shareholders that it would write down the value of Skype by $900 million. In 2011, eBay was fortunate to find a higher bidder for Skype. It sold Skype to Microsoft and realized a $1.4 billion profit, reported Wired.com. eBay and Skype merger failed because eBay miscalculated its customers' demand for Skype's product.