Mergers are often associated with massive numbers and viewed as highly valuable for both companies involved. And there’s plenty of reason for this. Mergers can lead to reduced operational expenses, increased revenue, higher sales, and greater shareholder value. Mergers also provide an opportunity for companies to diversify and increase market share. But these benefits are far from guaranteed. Mergers are incredibly complex and difficult to pull off. A review of the five largest mergers in history highlights the potential benefits of mergers but also serves as a reminder that not all mergers achieve success.
The Five Biggest Mergers in History
American Online and Time Warner Merger
The 2000 merger of American Online (AOL) and Time Warner (TWX) is the largest in history, with a value of $165 billion. At the time, American Online had a massive market share in the exploding internet provider market. The new company created by the merger between AOL and the mass media and entertainment conglomerate, Time Warner, created the largest technology company in the United States.
The goal of the massive merger was to create a company at the forefront of many areas of media, ranging from news to music. But the merger didn’t last. Not long after the merger occurred, the dot com bubble burst, causing AOL’s value to drop dramatically. AOL and Time Warner spun off into their own independent companies, less than ten years after the merger occurred.
Dow Chemical and DuPont Merger
When Dow Chemical and DuPont merged in 2017, the $130 billion mergers created the holding company, DowDuPont Inc. (DWDP), which operated Dow Chemical and DuPont. The goal of the merger was to create a business more heavily focused on key areas, including agriculture. Before the merger, $3 billion in expected cost synergies were expected. Shareholders of Dow Chemical received a fixed exchange rate of one share of DowDuPont for every share of Dow Chemical, while shareholders received a fixed exchange rate of 1.282 for every share of DuPont stock. With less than three years since the completion of the merger, the final impact is now yet known.
Anheuser – Busch InBev and SABMiller Merger
In 2016, Belgium-based Anheuser-Busch InBev (BUD) purchased British based SABMiller, bringing together the two largest brewers in the world. The $104.3 billion mergers meant that some of the biggest beer brands in the world, including SABMiller’s Castle Lager and Anheuser-Busch’s Stella Artois and Corona, were now under one roof. One of the major goals of the merger was to increase the market share of both the company’s major brands among the African and Latin American markets – two of the fastest-growing markets in the beer industry. Though the merger allowed the companies to grow some of their biggest brands, due to antitrust laws, the companies also had to divest themselves of some of their other, smaller, brands.
H.J Heinz and Kraft Foods Merger
In 2015, in a deal worth $100 billion, H.J Heinz and Kraft Foods combined to form The Kraft Heinz Company (KHC). With the merger, The Kraft Heinz Company became the fifth-largest food company in the world and the largest in the United States. One of the goals of the merger was to bring some of the biggest names in U.S food and drink under one roof. The brands housed under the new company included Heinz and Kraft, as well as many others including Philadelphia, Capri Sun, Maxwell House, Oscar Meyer, Lunchables, and Velveeta. Revenue at the time of the creation of The Kraft Heinz Company was estimated at $28 billion.
Exxon and Mobil Merger
The $81 billion mergers of oil giants Exxon and Mobil occurred in 1999. The deal only went through after first receiving approval from the Federal Trade Commission (FTC). At the time of the merger, Exxon was number one in the oil industry and Mobil was number two. The merger leads to a large amount of restructuring for the newly created Exxon Mobil Corp. (XOM). Some of this restructuring including selling more than 2,400 gas stations throughout the United States. Though this was an especially complicated merger, due to the difficulty gaining approval from the FTC and the restructuring, it was also one of the most successful mergers in history.
Mergers often grab the attention of the public. And with all the benefits they offer, this is no surprise. When executed successfully, mergers can be a major boon for companies and shareholders. But there is no promise of success. Of the largest mergers in history, some found success, some failed, and the success of others is still waiting to be seen.
Find out how you can become involved in Mergers & Acquisitions by reading this article.
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