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10 Disastrous Corporate Buyouts

By Hugh Fort in Spotlight, posted September 29, 2024

Corporate buyouts can reshape industries, but not all attempts end in success.

In some cases, a lot of time and money is spent by one company trying to buy another before a spectacular breakdown - like when Yahoo tried buying Google.

On the other hand, the buyout is completed, but isn't nearly as successful as hoped. Here are ten instances where ambitious buyout plans went awry, leading to massive financial and operational setbacks.

AOL and Time Warner (2000)

The merger between AOL and Time Warner is often cited as one of the most disastrous in history. Valued at $165 billion, the deal was supposed to create a media and internet powerhouse.

However, cultural clashes, the bursting of the dot-com bubble, and unrealistic synergy expectations led to massive losses. By 2002, the combined company reported a loss of $99 billion, the largest annual loss ever reported by a company at that time.

Daimler-Benz and Chrysler (1998)

Daimler-Benz’s $36 billion acquisition of Chrysler was intended to create a transatlantic automotive giant. However, the merger faced significant cultural differences and operational mismatches.

The combined entity, DaimlerChrysler, struggled to integrate, resulting in massive financial losses. Daimler eventually sold Chrysler to Cerberus Capital Management in 2007 for $7.4 billion, marking the end of a failed nine-year union.

HP and Autonomy (2011)

HP’s $11.1 billion acquisition of Autonomy was marred by controversy and financial disaster. HP accused Autonomy of inflating its financials, leading to an $8.8 billion write-down a year later.

The fallout included lawsuits, executive departures, and severe reputational damage for HP, highlighting the risks of inadequate due diligence.

In fact, legal action over the buyout has only just concluded, with founder Mike Lynch cleared of fraud charges.

Lynch recently lost his life after a yacht he was travelling on off the coast of Sicily sank during a storm.

Bank of America and Countrywide (2008)

In 2008, Bank of America acquired mortgage lender Countrywide Financial for $4.1 billion. The move aimed to expand BofA's mortgage business.

However, Countrywide's risky lending practices and the ensuing financial crisis saddled BofA with massive legal liabilities and financial losses, ultimately costing the bank over $50 billion.

Quaker Oats and Snapple (1994)

Quaker Oats’ $1.7 billion purchase of Snapple was intended to diversify its beverage offerings. However, mismanagement, distribution issues, and overestimated synergies led to a quick decline in Snapple’s value.

Quaker sold Snapple to Triarc for just $300 million in 1997, recording a significant financial loss.

Microsoft and Nokia (2013)

Microsoft’s $7.2 billion acquisition of Nokia’s mobile phone business was planned to bolster its presence in the smartphone market. However, the integration failed to deliver the expected results.

Poor sales, competition from Android and Apple, and strategic missteps led to a $7.6 billion write-down in 2015 and the eventual sale of Nokia’s assets.

eBay and Skype (2005)

eBay’s $2.6 billion acquisition of Skype was intended to enhance communication between buyers and sellers. But the expected synergies never materialized, and eBay struggled to integrate Skype into its platform.

In 2009, eBay sold a majority stake in Skype to private investors for $1.9 billion, taking a substantial loss.

News Corp and MySpace (2005)

News Corp’s $580 million acquisition of MySpace was an attempt to dominate the social media landscape.

MySpace quickly lost ground to Facebook, and failed to innovate or retain users.

By 2011, News Corp sold MySpace for $35 million, a fraction of its original purchase price.

RBS and ABN AMRO (2007)

The Royal Bank of Scotland’s (RBS) $100 billion acquisition of Dutch bank ABN AMRO, alongside consortium partners, was one of the largest banking deals ever. The financial crisis hit soon after, exposing the vulnerabilities of the deal.

RBS collapsed and needed a UK government bailout.

The acquisition is seen as a significant factor in RBS’s near-collapse.

Kmart and Sears (2004)

Kmart’s $11 billion merger with Sears was aimed at creating a retail behemoth to compete with Walmart.

However, the combined entity struggled with declining sales, poor management, and an inability to modernize. In 2018, Sears Holdings filed for bankruptcy, marking the failure of the ambitious merger.

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