Corporate mergers happen all the time. Some are successful almost immediately, while others offer mixed results or even outright failure. It’s not always obvious why one merger fails while another brings big wins for the merged company.
At NorthStar Venture Partners, we’re always keeping an eye on merger news and reading about merger examples to share with our clients. With that in mind, here are 5 merger examples and our take on why they were successful.
#1: Walt Disney Co. and Pixar
Our first merger example comes from the world of entertainment. In 2007, the Walt Disney Company acquired Pixar Entertainment for a price of $7.4 billion. This is a merger that makes sense at every level.
Disney has been the biggest name in family entertainment for decades, creating classics such as Cinderella, Mary Poppins, and The Lion King. Pixar was a newer entry on the market, but made a huge impact with its beloved films Toy Story and Finding Nemo.
The synergy between the two companies was apparent even to casual observers. The merger allowed Disney to consolidate its brand as the biggest provider of family-friendly films and it allowed Pixar to greatly increase its production process and release two new films per year. The post-merger Pixar films, including Up and WALL-E, have been hugely successful.
The likelihood is strong that this merger will go down as one of the most lucrative in history as Disney Pixar continues to thrive and grow.
#2: Sirius and XM Radio
The merger between satellite radio’s two biggest providers almost didn’t happen. In 1997, the FCC granted licenses to the two companies on the condition that they would not merge. So, when the merger was announced in 2007, it depended entirely on the FCCs willingness to override its earlier decision.
The new company, Sirius XM, has been an unqualified success and in many ways, the perfect example of a horizontal merger. In 2019, Sirius XM stock hit a 12-year high. The company now has more than 30 million subscribers and recently announced its acquisition of personalized streaming music service Pandora.
The merger allowed the new company to attract celebrities including Oprah Winfrey, Martha Stewart and Howard Stern, whose popularity brought in new subscribers. Sirius XM continues to seek out new acquisitions and we anticipate the company will continue to grow.
#3: eBay and PayPal
eBay was the world’s biggest online auction site when it acquired digital payment provider PayPal in 2002. Its goal was to facilitate online payments on eBay, making this corporate marriage the perfect vertical merger example.
The merger led to growth for the merged companies, with stocks rising dramatically in the aftermath. We do think it’s important to note that eBay spun off PayPal as a separate company in 2004 on the demands of investors, but there’s no question that the merger helped eBay solidify its reputation and its stock has continued to see modest growth while PayPal’s stock has increased rapidly.
#4: Google and Android
Another example of a successful vertical merger is the marriage between tech giant Google and Android, a start-up company whose acquisition allowed Google to solidify itself as the number one search provider in the world.
The acquisition happened in 2007, when Google bought Android for the relatively low price of $50 million. Google then spent the next three years using the Android technology it acquired via the merger to build a new operating system for mobile devices.
There’s no question that the Google-Android merger was a huge success. As of 2018, about 88% of all new mobile phones sold were powered by Android. Their overwhelming market share would not have been possible without Google’s acquisition of Android.
#5: RBC Centura and Eagle Bancshares, Inc.
Not every successful merger involves household names. Our final merger example is a classic market expansion merger. Eagle Bancshares was a regional bank headquartered in Atlanta, GA. RBC Centura acquired Eagle Bancshares in 2002.
RBC is the US arm of the Royal Bank of Canada. It had already made inroads in the United States by acquiring Centura Bank in Raleigh, North Carolina. The acquisition of Eagle Bancshares allowed RBC to expand its reach into the highly lucrative Atlanta market.
The mark of this merger’s success is the sale of RBC to PNC for $3.46 billion in 2012. A sale price that high would not have been possible without RBC’s pursuit of market expansion through mergers with regional banks such as Eagle Bancshares.
There is no way to predict with certainty whether a merger will be a lucrative one. However, looking at some of the world’s most successful mergers illustrates some of the factors that can lead to increased profits, market share, and viability.
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