mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

The Ten Takeovers Which Destroyed Most Shareholder Value

Thanks to The Independent for this one – the ten companies which have destroyed most value in the acquiring company’s share price. The most destructive deal of all-time was, reckons The Indie, RBS’ takeover of ABN-Amro. Apparently only 35 per cent of M&A deals lead to an increase in the value of the acquiring company’s shares

 

1. AOL – Time Warner 

 $164 billion deal in 2000. In 2002 reported a $99 billion loss with $45 billion write-down. Destroyed 97% of shareholder value.

 

2.  Invensys – Baan

Invensys paid Euros 762 million to buy Baan in 2000. Baan was sold in 2003 for $130 million.

 

3.  Taylor Woodrow – Wimpey  

Taylor Woodrow bought Wimpey for £5 billion in 2007. Since then £4 billion has been wiped off Taylor Wimpey’s share price.

 

4.  HSBC – Household

HSBC bought Household for $15 billion in 2003. By the end of 2007, HSBC had written down $17.2 billion on Household’s value.

 

5.  Quaker Oats – Snapple

In 1993 Quaker paid $1.7 billion for Snapple, outbidding Coca-Cola in the process. In 1997, Quaker sold Snapple for $300 million.

 

6. BMW – Rover

In 1994, BMW bought an 80 per cent of Rover for £800 million from British Aerospace, and a 20 per cent holding from Honda. After investing millions, it sold the whole company back to the ‘Phoenix Four’ for £10 in 2000. Rover went bust 2005.

 

7. Royal Bank of Scotland – ABN Amro  

The Royal Bank of Scotland and two other European banks paid Euros 71 billion for part of the Dutch lender ABN Amro, which RBS’s arch-rival Barclays had agreed to buy. RBS may have to write-down up to £45 billion on the value of ABN-Amro and RBS is now owned by the UK government.

 

8. France Télécom – Orange

In 2000, France Telecom bought Orange for Euros 45 billion. The stake has been written down several times since.

 

9. Daimler – Chrysler

Daimler paid $36 billion in 1998 to buy Chrysler. In 2007 80 per cent of Chrysler was sold to Cerberus for $7.4 billion. In 2009 Chrysler needs US government bail-out.

 

10.British and Commonwealth  Holdings – Atlantic Computers 1988

After £434 million takeover, both companies were bankrupt within 12 years.

Tags: a310, arch rival, european banks, france telecom, quaker oats

Related posts

9 Comments

  1. David Manners
    February 07, 2010 10:48

    Interesting, Joseph, and thanks for that, but the post was about semiconductor industry companies.

  2. Joseph Tovey
    February 07, 2010 02:27

    If you check the record, I believe you will find the acquisition of Mobil by Exxon, the acquisition of Stdard Oil of Ohio (Sohio) by BP, and the acquisitions of the minority shares of Shell US and Shell Canada by Royal Dutch/Shell T&T were beneficial to the acquirer. Discipline, ego-control, in-depth knowledge of the industry and competence usually improve the odds. Luck helps.
    Joseph Tovey

  3. David Manners
    March 10, 2009 15:22

    Rupert, as always, I agree with you entirely but, as to Broadcom, I would direct your attention to a remark of Scott McGregor’s: “We buy one or two companies every quarter. 25 to 30 per cent of the acquisitions are neutral as to shareholder value; 25 to 30 per cent destroy value; 25 to 30 per cent add value.”

  4. Rupert
    March 10, 2009 14:58

    Alan: “There are a few mergers and acquisitions that have paid off … but I’m struggling to think of them. Anyone?”
    I have not seen an analysis but I suspect that most of Broadcom’s acquisitions have worked out, at least on paper.
    Likewise Cisco.
    In terms of disasters nearer to our industry:
    Marconi buying Fore and others. In your list above, most of the purchasers survived but that string of acquisitions was fatal.
    Compaq buying DEC
    I suspect many of Intel’s aquisitions were great for the purchased companies’ investors, great for whoever bought them from Intel afterwards (Marvell, Cortina, CCPU, Radisys) – and disastrous for Intel.

  5. Garry
    March 10, 2009 10:20

    Any0one got a list of Nortels M&A’s? -Garry

  6. David Manners
    March 05, 2009 21:53

    Alan, Thomson Semiconducteurs and SGS-Ates, perhaps?

  7. March 05, 2009 20:25

    Many LBO’s pay off investors (see Blackstone/Carlyle led Freescale LBO) but they usually sink companies.
    There are a few mergers and acquisitions that have paid off … but I’m struggling to think of them. Anyone?
    Alan

  8. David Manners
    March 04, 2009 10:18

    Hi Anonymous, I think the lesson is that most take-overs are done for show, not for dough. i.e they’re done to boost the CEO’s ego.
    PricewaterhouseCoopers the accountancy company produced a good book called ‘Five Frogs on a Log’, pointing out that most M&A activity is destructuve of shareholder value.

  9. Anonymous
    March 04, 2009 10:03

    Hi David,
    frightening…
    What is the learning here in your opinion?