Mergers are consolidations where two companies join to form one. Mergers happen for many reasons. They may form to create a competitive advantage, increase business, enter a new market, or reduce costs, or any combination of these factors. Mergers are very common. The first wave of these is known as the “great merger movement” in American history, occurring between 1893 and 1904, were horizontal, involving two businesses in the same field, often resulting in monopolies. The government intervened to ban monopolies, leading to verticle mergers, to reduce costs and improve a company’s overall efficiency. usually between businesses that are not competitors. From 1955 to 1970, expansion and diversification drove decisions when the Third Wave came about. When neither horizontal nor vertical integrations provided the solutions that these large companies were looking for, they turned their went to conglomerate mergers and acquisitions. These were between companies often unrelated. In the fourth wave.
we began to see hostile takeovers. The 1990’s ushered in the fifth wave, creation of multinational companies and massive conglomerates. The sixth wave was spurred by globalization. December 2007, the mortgage crisis in the US, coinciding with the recession, marked the end of the Sixth Wave. The seventh wave will likely occur in Brazil, Russia, India, China, and South Africa, five of the emerging national economies of the world.
This article outlines the top ten biggest business mergers ever until 2017.
10. Citi Corp and Travelers Group Inc.
The year was 1998. On April 6, Travelers Group Inc and Citicorp announced their plans to complete a merger worth $70 billion. Actually, when the firms combined, they created a $140 billion company called Citigroup Inc. At the time, this was the largest financial service company in the world. At first. the Glass-Steagall Act, or the Banking Act of 1933 prohibiting commercial banks from engaging in the investment business and enacted as an emergency response to the failure of 5,000 banks during the Great Depression, required the new company to get rid of its insurance assets within five years of the merger. However, legislation passed in 1999 reversing the Depression-era act, and allowing the new firm to keep its banking and insurance services under the same umbrella.
9. Comcast and AT&T Broadband
Comcast and AT&T Broadband merged in 2001 with a $72 billion deal and Comcast became the largest cable company in the United States. The deal expanded Comcast’s subscriber base tremendously. The two companies initially agreed that the merger would be called AT&T Comcast Corporation, but they eventually agreed to keep the Comcast Corporation name when the deal was completed.
8. Royal Dutch Petroleum Corporation and Shell Transport & Trading
Royal Dutch Petroleum Corporation and Shell Transport & Trading had worked together closely for decades before they merged in 2005. The deal was worth $74.5 billion. Shareholders were not thrilled because they worried about how the firm would be managed. Yet, the shareholders eventually approved the deal and the companies merged into Royal Dutch Shell PLC. It is the second largest publicly traded oil firm in the world.
7. Glaxo Wellcome PLC and SmithKline Beecham
In September of 2000, Glaxo Wellcome PLC and SmithKline Beecham deal in September 2000 surprised investors of both companies with plans to combine in a deal worth $75.7 million. While the two companies talked about combining forces in 1998, the talks fell apart because of a power struggle between the rival firms. However, the deal announced in 2000 went perfectly, creating GlaxoSmithKline PLC to create the world’s largest drugmaker at the time.
6. Exxon Corp and Mobil Corp
Because of continued low oil prices, Exxon Mobil Corporation and Mobil Corporation complete a merger in 1999 worth #81 billion. The deal gave Exxon Mobil a huge advantage at the head of the oil industry. It was the largest “supermajor” at the time. At that time, Exxon was criticized since many people thought they had paid too much, but the deal is now considered as one of the most successful in merger and acquisition history.
5. AT&T and BellSouth
AT&T Inc. announced plans in March 2006 to acquire BellSouth, a deal meant to give the company more dominance in the wireless market. The deal was finalized in December, worth $86 billion, allowing AT&T expand its wireless coverage to rural parts of the United States. The company also used the new merger to create bundled services including wireless services, television, and internet connections in order to gain more subscribers and keep customers from changing to other providers.
4. Pfizer and Warner-Lambert
In 2000, Pfizer Inc. made history with their hostile takeover of Warner-Lambert Company amounting to $90 billion. There was huge drama between the companies. The three months of drama before the sale led many analysts to call the deal one of the most hostile takeovers in history. Warner-Lambert was initially supposed to be purchased by American Home Products Corporation, but the company walked away from the deal with $1.8 billion in break-up fees.This was one of the largest payouts ever made for a failed deal.
3. Verizon and Verizon Wireless from Vodafone Group PLC
Verizon Communications Inc. worked for almost a decade to acquire Vodafone Group PLC’s 45 percent stake in Verizon Wireless. In September 2013, their efforts paid off when the two companies agreed to a $130 billion deal. At the time, the wireless unit was bringing in about $21.8 billion a year. The deal put Verizon in a financial position to invest in better infrastructure in the United States and increase its competitiveness in the market.
2. AOL and Time Warner
AOL and Time Warner merged in January 2000. When they announced the union, the combined companies had a market cap of $350 billion. Because of the deterioration of AOL and other market factors, the companies were worth significantly less by the time of the deal. The $164 merger is considered one of the worst in history and lasted nine years before Time Warner spun off from AOL as an independent company.
1. Vodafone and Mannesmann
The merger between Vodafone and Mannesmann in February 2000 is the largest in history. The UK-based Vodafone AirTouch PLC, now known as Vodafone Group Plc, bought the German company, Mannesmann, despite resistance from most Germans. Germans worried that the merger marked the end for German businesses. The acquisition made Vodafone the world’s largest mobile operator and set the stage for future mergers and price wars in the telecom arena.
Mergers will no doubt continue. They will just change in nature for better or worse. Whatever comes next in this arena will be interesting, as it will change the face of business and affect buying patterns and power. It is hard to imagine that companies in America could become much larger, but likely the trend will now be mirrored in presently undeveloped countries.