The 9 Worst M&A Deals In History

This month, Anheuser-Busch InBev
to buy SABMiller in a $105.5 billion deal, one of the largest in the history of wall street. The new company is expected to dwarf competitors in the global market and give Anheuser-Busch a favorable position in the beer space. By combining their resources, both firms believe that the new company will be more powerful, but such deals don't always work out that way. Intact, many of the largest deals on Wall Street fall through years later when companies are unable to merge successfully. Things like corporate culture, operations and differing opinions among execs often keep deals that are meant to be great from realizing their potential. Here's a look at 10 M&A deals that fell apart soon after the ink was dry.
1. Fast Food Failure
In 2008, fast food chain Arby's acquired rival
Wendys CoWEN
in a deal worth $2.34 billion. However, just 3 short years later, Wendy's
decided to sell
Arby's to private equity firm Roark Capital Group for $130 million. The deal, which was meant to create a fast food behemoth that could take on the likes of McDonalds or Burger King, ultimately fell apart when Arby's restaurants were unable to draw in customers and turn a profit. The roast beef sandwich chain's struggles felt like an anchor to Wendy's, which unloaded the firm after realizing that the combination had done little to boost its marketshare.
2. A Costly MistakeBank Of America
purchase of Countrywide in 2008 went down as one of the worst M&A deals ever made in the financial sector. At a time when the financial crisis was wreaking havoc on the industry, Bank of America CEO Ken Lewis announced that the firm would acquire struggling mortgage lender Countrywide. The deal was expected to boost Bank of America's home loans division, but instead it ended up costing the bank billions. The firm bought Countrywide for just $2.5 billion, a bargain according to Lewis. However, legal expenses and real-estate losses ended up
the firm more than $40 billion over the next few years. The timing of the deal was unfortunate, as the US housing market collapsed soon after the deal was completed.
3. Discount Disaster
Retailers Sears and Kmart merged in 2005 in a deal that was expected to help both firms recover from declining sales and sagging margins. However, the deal did little to boost either's bottom line as the two continued to struggle in the years following the deal.
Sears Holdings CorpSHLD
saw its revenue decline further following the merge as more and more customers flocked to rivals like Wal-Mart. Eventually, the firm
that it would be forced to close down more than 100 stores in order to cope with a lack of revenue. What went wrong? Many blame the two stores' poor efforts to keep up with the changing preferences of the American public, citing their unsuccessful rebranding attempts.
4. Terrible Tech Acquisition
In 2005 as internet use took off across the world, auction site
eBay Inc.EBAY
decided to make a bet on its future with a $2.6 million acquisition of online communication site Skype. At the time, many were skeptical of Skype's business model, which allowed people to make phone calls over the internet, but eBay was adamant that the purchase would boost its sales. However, four years later the two admitted they couldn't make it work and eBay
Skype to private investors for $1.9 billion. The idea behind eBay's original purchase was to better connect its buyers and sellers using Skype's technology. Unfortunately, eBay users decided to stick to email rather than making voice calls, making the two businesses incompatible.
5. Cable Meltdown
Perhaps the most famous failed merger was the union between
Time Warner Inc.TWX
, a deal worth $164 billion that still stands as one of the largest in history. The two firms were
to come together after the deal was made official, with the corporate cultures of the two largely different. Time Warner became increasingly resentful of AOL following the merge as the company was struggling to retain users and stay afloat in the shifting tech landscape. Eventually, Time Warner spun off AOL Inc as a private company in 2009, just 9 years after the purchase, citing the firm's ailing financials.
6. Snapple Snafu
In 1994, Quaker Oats decided to acquire beverage company Snapple for $1.7 billion. The firm believed that Snapple would fit in with i's Gatorade sports drink arm and disregarded chatter on Wall Street that Snapple was overpriced. Quaker Oats' management was unable to leverage its relationships with big-brand supermarkets to boost Snapple sales and differing corporate cultures negatively affected Snapple's marketing efforts. Quaker Oats gave up and
Snapple just over two years later and by then the firm's revenue had gone from $700 million to $500 million. Snapple was sold to a holding company for just $300 million, meaning that Quaker Oats had lost around $1.6 million each day that it held on to Snapple.
7. Cross Border Crisis
Germany's Daimler-Benz
made a play
for Detroit's Chrysler back in 1998 in an effort to take on auto superpowers like
Toyota MotorsTM
General MotorsGM
. In a deal worth $36 billion, the two joined forces, but excitement about the merge soon faded as it became apparent that corporate cultures from two different sides of the Atlantic would be difficult to marry. Daimler had always targeted affluent customers while Chrysler catered to the price-conscious crowd, something which led Daimler to break its parts-sharing agreement with Chrysler and worry that partnering with a lower-end brand would hurt Daimler's luxurious image. In the end, Daimler dissolved the partnership and sold Chrysler to Cerberus Capital Management in 2007.
8. Brain Pain
Toy maker
Mattel CoMAT
acquired interactive education firm the Learning Co. for $3.6 billion in 1999, but later sold the company just a year later. Almost immediately after the merger was complete,
problems began to surface
as Learning Co. games lost their appeal in an age where Apple and other tech companies were beginning to gain traction. While the Learning Co. had been an early success among educational game makers with popular hits like "Where in the World Is Carmen Sandiego?" and "Myst," the firm failed to deliver beyond those titles. Mattel blamed the Learning Co. for disappointing earnings in the year following the acquisition and eventually took a $430 million hit and unloaded the software firm.
9. Communication Collapse
In 2005,
bought a majority stake in Nextel Communications for $35 billion to create the world's third largest telecom provider. With Sprint's expertise in the traditional consumer market and Nextel's dominance in the business and infrastructure space, many believed that the deal would propel the new company to the front of the pack. However, blending the two corporate cultures proved difficult and many of Nextel's execs jumped ship following the deal. The integration of the two firms was painful as communication between the Sprint and Nextel arms of the business was labored and cumbersome, with each firm maintaining its own separate headquarters. In 2013, Sprint
decided to
to shut down its Nextel network after dealing with its declining customer base for years.
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