Here are the top failed mergers and acquisitions

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In the world of finance, mergers and acquisitions (M&A) are often compared to marriages. Both of these developments take place after careful deliberation and negotiation, and ironically, mergers and acquisitions, just like marriages, sometimes fall apart. The latest case of a deal gone wrong is that of Twitter.

Billionaire Elon Musk ended his $44 billion deal to buy Twitter on Friday after the microblogging site failed to provide information on fake accounts the Tesla CEO wanted. In response, Twitter Chairman Bret Taylor said he would take legal action to ensure the merger deal goes through as planned.

While the recent Twitter controversy has become the talking point across the world, several costly mergers and acquisitions have also gone awry earlier. Before discussing such previous transactions, let’s understand the difference between a merger and an acquisition. An acquisition occurs when company A buys a majority percentage of the shares (or all the shares) of company B. Meanwhile, a merger consists of two entities coming together to form a new entity.

Here’s a look at mergers and acquisitions gone wrong

Google and Motorola: On paper, the deal made perfect sense. Google created the Android operating system and Motorola was a giant player in the mobile handset market. However, Motorola was unable to deliver on its end of the deal, according to Google. In fact, Google officials thought so badly of new Motorola handsets that they approached Samsung and LG to develop its Nexus handsets.

Microsoft and Nokia: Once the world’s largest handset makers, Nokia and tech giant Microsoft have teamed up to create smartphones running the Windows operating system. However, we all remember how it happened. Nokia, the Finnish company, which dominated the world in the era of feature phones, failed to keep up with the evolution of the smartphone era. As a result, Microsoft had to write off $7.6 billion and lay off over 15,000 Nokia employees.

eBay and Skype: eBay’s acquisition of Skype was based on the idea that buyers and sellers on eBay could communicate via Skype. Another idea that made perfect sense on paper. However, the two companies failed to realize that people don’t want to video call strangers, especially when they can complete the transaction via text or email. After four years of trading, eBay ended up selling two-thirds of Skype for $1.9 billion.

Reliance Communication and Aircel: In a bid to deal with the huge debt (Rs 958 crore at the time), Reliance Communication, headed by Anil Ambani, started talks on a merger deal with Aircel. Officials of the two companies said the merger would help them survive in the highly competitive telecommunications market and make better use of infrastructure. However, the deal was mutually canceled due to several reasons including opposition from creditors, high taxation, lengthy process and others.

HDFC and Maximum Lifetime: At the time this merger was contemplated, HDFC was a private company and wanted to be listed. A merger with Max Life, the largest private insurance company at the time, would have meant an automatic public listing for HDFC without going through the cumbersome route of an initial public offering (IPO). However, the proposed merger was not approved because Article 35 of the Insurance Law prohibits the merger of the insurance company with non-insurance companies.

(Edited by : Sudarsanan Mani)

First post: STI

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