Four Huge Mergers That Shaped America’s Economy
There are a lot of reasons that companies find it beneficial to merge. One term that is frequently tossed around in the merging and acquisition industry is “synergy.” Basically, if the strengths (and weaknesses) of two businesses complement each other, joining forces will cause the married company to do far better than either of them could alone. Other reasons include increasing margins by buying out companies in the supply chain. Some companies merge in order to further a common goal, such as improving green energy. Let’s talk about some company mergers that have had the greatest impact on America’s economy:
- AOL Time Warner
At one point in time, nothing was as powerful as America Online (AOL). The turn of the century marked the ushering in of household internet, and AOL was the one to lead it to us. We all remember those neon CDs that came in the mail that generously offered 25 FREE hours of internet. Eventually AOL became Beatles-level powerful. To quote John Lennon, they were “bigger than…Time Warner.”
Right at the turn of Y2K, AOL shelled out a whopping $164 billion dollars to acquire the (at the time) sinking Time Warner. The expensive union lasted only nine years, and its split is what makes this merger interesting. AOL was successful in turning Time Warner into a thriving company. However, in the process, AOL came under fire for their unsavory business practices. In 2009, Time Warner became its own entity again, while AOL approached a slow and inevitable demise.
- PennBarry Industrial
There was a time when PennBarry Industrial wasn’t a thing. In 2005, five of the commercial HVAC industry’s oldest companies (some as old as 145 years!) came together to create PennBarry Industrial. Together, PennBarry Industrial holds each of the greatest strengths that the separate companies offered on their own, and balances out each other’s weaknesses. PennBarry Industrial still produces the commercial fans and equipment that the separate companies created on their own, but hold the flexibility to evolve and create green-focused technology that the smaller companies that PennBarry Industrial is comprised of were never capable of on their own.
- Vodafone and Verizon Communications Inc.
The beast that we know as Verizon Communications Inc. is actually the product of a series of mergers over multiple decades. In February of 2000, Vodafone AirTouch PLC, a mobile communications provider based in UK, acquired several other European mobile technology companies in a deal that cost a record-breaking $180.95 dollars. This merge in itself was historic as it created a single major phone provider in Europe. Within the conglomerate, Vodafone owned nearly half of the American cellphone provider, Verizon (45% stake, to be exact).
It took Verizon over a decade to create a deal with Vodafone that gave it complete ownership of itself. In 2013, Verizon gave Vodafone $130 Billion to acquire its ownership. This is six times more than Verizon brought in in a single year at the time. However, after acquiring its own stock, Verizon was able to build up its American infrastructure and become an industry leader on this side of the pond.
- ATandT and Bellsouth
While we’re on the subject of mobile mergers, let’s talk about another that really made the cellphone market what it is today. In December of 2006, ATandT purchased BellSouth (remember them?) for $86 billion. At the time, the mobile industry was still being established. By taking over BellSouth, ATandT made themselves a key player. It also made it possible for ATandT to diversify its offerings. Through the merge, customers were able to bundle their TV, landline, and cellphone with a single provider. Once a customer was that invested in a single company, it was less likely that they would cancel service and go with a competitor. The concept was brilliant and successful until the utility of landlines declined and the bundle was more cumbersome than valuable.
There are several reasons that a company merges or acquires another company. In the case of PennBarry Industrial, it was to join powers that created a industry giant none of the smaller companies were capable of on their own. AOL and Time Warner wanted to diversify its profit avenues. Verizon and ATTandT just wanted to squash the competition. All valid, and a few successful!