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Mergers Research

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Disney-Pixar
Mickey and Nemo. Pinocchio and “Toy Story.” Cinderella and “Cars.” The merger of legendary Walt Disney and everything-we-create-kids-adore Pixar was a match made in cartoon heaven. Disney had released all of Pixar’s movies before, but with their contract about to run out after the release of “Cars,” the merger made perfect sense. With the merger, the two companies could collaborate freely and easily.Did the merger work? Well, take a look at the successful movies that Disney and Pixar have put out since: “WALL-E,” “Up,” and “Bolt.” Pixar has plans for twice-yearly films, unthinkable before the merger, and has certainly gained the expert advice from Disney when it comes to advertising, marketing plugs, and merchandising. When it comes to marketing to children, no one does it better than Disney. Even pre-merger cartoon “Cars” got the Disney treatment and remains a top seller in merchandising amongst 4 year old boys (just ask my nephew). irius/XM radio merger
On July 29, 2008, satellite radio officially had one provider when Sirius Satellite Radio joined forces with rival XM Satellite Radio. The merger was officially announced over a year before, in February 2007, but the actual merger was delayed due to one tiny problem – when satellite radio first began in 1997, the FCC granted only two licenses under one condition: that either of the holders would not acquire control of the other.Oops. So Sirius and XM filed the proper paperwork with the FCC, allowed the FCC to investigate the merger, and waited patiently for the approval they needed. And although time will tell if the new Sirius XM company will succeed in the long-run, I consider this merger a success due to the number of big names recently added to their roster (Oprah, Howard Stern, Martha Stewart), as well having the foresight to combine forces in a down market.

Tata/jaguar land rover

the Tata takeover of Jaguar Land Rover (“JLR”) in 2008 is one of our five “must research” deals for the AQA BUSS4 research theme in 2012. And this recent article provides students with some compelling evidence about how successful the takeover has been for Tata, the private Indian conglomerate that is now the UK’s largest manufacturer. The Telegraph reports that JLR made record pre-tax profits of £559min the final three months of 2011 as demand for its premium cars soared in Asia. This follows on from JLR’s record profits of £1.1bn in 2010.
The key drivers for JLR’s improved performance include:
- Rapid growth in demand from emerging markets, particularly China which has now overtaken the UK as JLR’s largest market- The impact of new model development (much of which was funded by the previous owner Ford) - e.g. the Range Rover Evoque- A successful takeover integration process (a model for other takeovers?) which focused on stability and continuity (a so-called “softly-softly” approach)

Daimler Benz/Chrysler ($37B)
In 1998, Mercedes-Benz manufacturer Daimler Benz merged with U.S. auto maker Chrysler to create Daimler Chrysler for $37 billion. The logic was obvious: create a trans-Atlantic car-making powerhouse that would dominate the markets. But by 2007, Daimler Benz sold Chrysler to the Cerberus Capital Management firm, which specializes in restructuring troubled companies, for a mere $7 billion.What happened? It may be another case of corporate culture clash. Chrysler was nowhere near the league of high-end Daimler Benz, and many felt that Daimler strutted in and tried to tell the Chrysler side how things are done. Such clashes always work to undermine the new alliance; combine that with dragging sales and a recession, and you have a recipe for corporate divorce.
Sears / Kmart
Towards the end of the twentieth century, department store legend Sears found itself slowly failing, stuck in between the success of low-end big-box stores like Target and Walmart, and high-end department stores like Saks Fifth Avenue. Hedge-fund investor Eddie Lampert purchased both a failing Sears and Kmart in 2005, and merged them to become Sears Holdings.However, Sears Holdings continued the downward spiral of both companies. Some blame their focus on “soft goods” (clothes and home goods) rather than hard goods (Kenmore appliances and tools). Others think Sears tried to compete with mega giant Walmart with a variety of stores - Sears Essentials, for instance – that were utter failures.In any case, by 2007, Lampert was named the America’s Worst CEO, and Sears Holdings remains on the brink of utter failure, especially in light of the recent recession.

Sprint/Nextel
In 2005, another major communication merger occurred, this time between Sprint and Nextel Communications. These two companies believed that merging opposite ends of a market’s spectrum – personal cell phones and home service from Sprint, and business/infrastructure/transportation market from Nextel – would create one big happy communication family (for only $35 billion).But the family did not stay together long; soon after the merger, Nextel executives and managers left the new company in droves, claiming that the two cultures could not get along. And at the same time, the economy started to take a turn for the worse, and customers (private and business alike) expected more and more from their providers. Competition from AT&T, Verizon, and the iPhone drove down sales, and Sprint/Nextel began lay-offs. Its stocks plummeted, and for all those involved, the merger clearly failed.…...

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