When a merger and acquisition succeeds, it becomes a well-known corporation that everyone knows or uses. When it fails, it results in astronomical losses that take years to recover from. The following are examples of massive failures that were caused by bad mergers.
America Online and Time Warner: $65 billion
America Online (AOL) is an Internet service provider that provides Web browsing, email, and instant messaging services. Time Warner, now known as Warner Media, LLC, is a mass media corporation that provides film and cable TV services. Both companies are based in New York City and provide communications services to Americans.
In 2001, America Online and Time Warner lost $65 billion in a failed merger. Analysts state that one reason is the lack of understanding of new media. AOL mainly provided online services while Time Warner provided television services. The total net loss was $99 billion.
Daimler-Benz and Chrysler: $36 billion
In 1998, Daimler-Benz, a German-based car manufacturer known as Daimler AG or Mercedes-Benz, attempted to merge with Chrysler, an American-based car brand. Although both companies were internationally successful and made highly rated automobiles, they were from two countries and experienced a cultural clash.
eBay and Skype: $2.6 billion
Another example of companies that are too different is the failed 2005 merger between eBay, an online auction and retail store, and Skype, a digital communications company. The managers of both companies believed that eBay customers could benefit from using digital services like VoIP, videoconferencing, and instant messaging. They wanted to make it easier for buyers to communicate with sellers through instant messages and video or phone calls.
They thought that this streamlined flow of information could improve buyers’ trust, reduce fraud and increase the speed of financial transactions. The reality was that eBay buyers would instead remain anonymous and not reveal too much information to strangers if they could send simple emails.
Most mergers and acquisitions occur because the two companies provide different services that cannot be successfully integrated. Another reason is that while one company needs certain services, another may have no use for them. Even if both companies are very successful, a wrong merger could result in a high-valued failure that exceeds billions of dollars. All business owners must be extra cautious and do additional research when considering a merger.