Businesses, flush with cash, are finding the allure of the merger or acquisition extremely tempting in 2010.
While revenues might be flat, and investors may be calling for dividends, companies are choosing to spend their cash on firms of all shapes, sizes, and synergies.
Of course, synergies means layoffs, so essentially companies are using their money to fire employees.
The result is some massive deals. Take a look at some of the biggest one’s the hit the market in the last 9 months.
Date: April 28, 2010
Deal size: $1.2 billion
Why this matters: Because this deal signals that HP is getting serious about entering the smartphone market. With the M&A financed primarily with cash (shareholders were paid $5.70 for each Palm common stock), HP essentially paid for a company that had previously experienced 11 straight quarterly losses and speculation of a Chapter 11 filing. The question here is whether the tech giant can create a smartphone and mobile platform that will compete with the likes of Apple's iPhone, Google's Android, and RIM's Blackberry. HP, which has been on the prowl for M&A deals this year (swallowing up Palm's one-time parent company, 3Comm), insists that it will successfully leverage Palm's innovative webOS operating system to become a leader in the highly profitable smartphone market.
Date: September 13, 2010
Deal size: $1.56 Billion
Why this matters: Hertz Global Holdings, which has been in competition with the Avis Budget Group for purchase of Dollar Thrifty, just amped its acquisition price since the agreed-upon strike price of $1.2 billion in April of 2010. Hertz is in the process of shedding its Advantage Rent-a-Car brand to finance this takeover.
Date: July 5, 2010
Deal size: $1.7 billion
Why this matters: This takeover marks Thailand's largest-ever acquisition of a foreign firm, and gives Banpu Public access to 10 Australian mines. Australia's mines are being eyed by foreign companies who favour the country's soft tax policies and are enticed by its proximity to major energy and materials consumers like China and India.
Date: August 2, 2010
Deal size: $1.8 billion
Why this matters: The Geely - Volvo marriage has been on the docks since mid-2009 and cemented its bonds with a sales statement in March. Purchased with $1.3 billion in cash, Volvo represents Geely's ambition to expand into the premium car market in the domestic and overseas market and its willingness to pay a handsome sum for an uncertain entry into the luxury market space. And while Li Shufu may now be Chairman of the Swedish automobile unit, he's extending control with a light touch, allowing Volvo's management and workers to continue producing its wares in Europe rather than in the East.
Date: January 11, 2010
Deal size: $7.6 billion
Why this matters: Because the Dutch brewer's purchase of this Latam beer powerhouse further cements its presence in the Emerging Markets. The deal would consolidate the number of global players in the brewery trade and give Heineken further access to the world's fourth largest beer market. The transaction was financed purely with stock and makes FEMSA Heineken's second largest shareholder.
Date: August, 19, 2010
Deal size: $7.68 billion
Why this matters: This deal was the equivalent of an elopement in the M&A world and proved quite a shocker on Wall Street and in Sillicon Valley. Intel, an innovator and the mainstream player in the computer chip industry, was making an attempt to diversify beyond the world of computers with its purchase of a security software company (shares were purchased at a 60% premium). It will attempt to install security settings in computer hardware and potentially offer its security services to smartphones (widespread cases of hacking and virust outbreaks still have yet to surface on these phones). McAfee, which has experienced YoY double-digit growth recently and is currently the Number 2 player in the antivirus software market, may just be Intel's dealmaker in the growing electronics security sector.
Date: March 17, 2010
Deal size: $17.66 billion
Why this matters: America Movil, a provider of wireless services in Latam markets and controlled by Carlos Slim, further expanded its presence in the booming Latam telecom sector by purchasing a prominent investment holding company focused on telecom financing.
Date: January 19, 2010
Deal size: $18.9 billion
Why this matters: Financed with a combination of cash (5 pounds per Cadbury stock) and stock (0.1874 Kraft shares for each Cadbury share), Kraft's acquisition of Cadbury created the world's dominant player in the chocolate and candies market space. And while there may have been some hand wringing over the fact that another of Britain's venerable brand knights decided emigrate to American soil or the fact that Buffett was none too pleased that Kraft CEO Irene Rosenfeld didn't stick with the initially proposed $17.1 billion for the deal (he is Kraft's biggest shareholder with a 9.4% stake), the deal was the largest ever involving a European food and beverage firm.
Kraft seeks not only to leverage Cadbury's iconic brand and products in their bid to further expand in the confectionary industry -- it will also maximise the benefits of Cadbury's dominant brand presence in countries like India, Turkey, South Africa, and Mexico to further become a global food titan.
Date: August 26, 2010
Deal size: $38.7 billion
Why this matters: This deal has been in the works since 2008, when Novartis first entered into talks with Nestlé S.A. to purchase their 77% stake in the U.S. eye care company. The final outcome, presumably, would be a full acquisition of Alcon by the Swiss drug manufacturer, regardless of complaints from minority shareholders that the deal low-balled their share price. This acquisition represents Novartis's attempt to diversify outside of its traditional focus (and the health care industry's heavyweight emphasis) on mass-market drug manufacturing. The eye care industry is a less crowded market space and sports 'much more potential' for growth in the Emerging Markets, according to Novartis CEO Daniel Vasella.
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