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Mastering M&A: Your Ultimate Guide for Understanding Mergers and Acquisitions

• August 11, 2023

Table of Contents

The process of two companies or their major business assets consolidating together is known as an M&A (merger and acquisition). It is a business strategy involving two or more companies merging to form a single entity or one company acquiring another. These transactions take place entirely on the basis of strategic objectives like market growth, expanding the company’s market share, cost optimisation and the like.

M&As are also an essential component of investment banking capital markets . It helps in revenue generation, shaping market dynamics, and more. This article will provide a profound understanding of mergers and acquisitions including the types, processes, and various other nitty-gritty involved in the investment banking fundamentals relevant to this business strategy . 

Types of Mergers and Acquisitions 

There are many types associated with the mergers and acquisitions strategy. These are:

Horizontal Mergers 

The merger or consolidation of businesses between firms from one industry is known as a horizontal merger. This occurs when competition is high among companies operating in the same domain. Horizontal mergers help companies gain a higher ground due to potential gains in market share and synergies. Investment banking firms have a major role to play in identifying potential partners for this type of merger. 

Vertical Mergers 

A vertical merger occurs between two or more companies offering different supply chain functions for a particular type of goods or service. This form of merger takes place to enhance the production and cost efficiency of companies specialising in different domains of the supply chain industry. Investment banking firms help in the evaluation of said synergies to optimise overall operational efficiency.

Conglomerate Mergers 

A conglomerate merger occurs when one corporation merges with another corporation operating in an entirely different industry and market space. The very term ‘conglomerate’ is used to describe on company related to several different businesses. 

Friendly vs. Hostile Takeovers 

Leveraged buyouts (lbos) .

A leveraged buyout occurs when a company is purchased via two transactional forms, namely, equity and debt. The funds of this purchase are usually supported by the existing or in-hand capital of a company, the buyer’s purchase of the new equity and funds borrowed. 

Investment banking services are majorly relied upon throughout the entire process encompassing a leveraged buyout. Investment banking skills are necessary for supporting both sides during a bid in order to raise capital and or decide the appropriate valuation. 

Mergers and Acquisitions Process 

To succeed in investment banking careers, your foundational knowledge in handling mergers and acquisitions (M&A) should be strong. Guiding clients throughout the processes involved in M&A transactions is one of the core investment banking skills.

Preparing for Mergers and Acquisitions

To build a strong acquisition strategy, you need to understand the specific benefits the acquirer aims to gain from the acquisition. It can include expanding product lines or entering new markets.

Target Identification and Screening

The acquirer defines the requirements involved in identifying target companies. They may include criteria like profit margins, location, or target customer base. They use these criteria to search for and evaluate potential targets.

Due Diligence

The due diligence process begins after accepting an offer. A comprehensive examination is conducted wherein all aspects of the target company's operations are analysed. They may include financial metrics, assets and liabilities, customers, and the like. Confirming or adjusting the acquirer's assessment of the target company's valuation is the main goal.

Valuation Methods

Assuming positive initial discussions, the acquirer requests detailed information from the target company, such as current financials, to further evaluate its suitability as an acquisition target and as a standalone business.

Negotiating Deal Terms

After creating several valuation models, the acquirer should have enough information to make a reasonable offer. Once the initial offer is presented, both companies can negotiate the terms of the deal in more detail.

Financing M&A Transactions

Upon completing due diligence without significant issues, the next step is to finalise the sale contract. The parties decide on the type of purchase agreement, whether it involves buying assets or shares. While financing options are usually explored earlier, the specific details of financing are typically sorted out after signing the purchase and sale agreement.

Post-Merger Integration

Once the acquisition deal is closed, the management teams of the acquiring and target companies cooperate together to merge the two firms and further implement their operations.

Taking up professional investment banking courses can help you get easy access to investment banking internships that will give you the required industry-level skills you need to flourish in this field. 

Financial Analysis   

Financial statements analysis  .

Financial statement analysis of a merger and acquisition involves evaluating the financial statements of both the acquiring and target companies to assess the financial impact and potential benefits of the transaction. It may include statements like the income statement, balance sheet, and cash flow statement. It is conducted to assess the overall financial health and performance of the company.

In investment banking, financial modelling is a crucial tool used in the financial statement analysis of a merger and acquisition (M&A). Investment bankers develop a merger model, which is a comprehensive financial model that projects the combined financial statements of the acquiring and target companies post-merger. 

Cash Flow Analysis  

Examining a company's cash inflows and outflows to assess its ability to generate and manage cash effectively. In investment banking jobs , one of the primary roles is to assess the transaction structure, including the consideration paid and the timing of cash flows. 

Ratio Analysis  

Utilising various financial ratios to interpret and analyse a company's financial performance, efficiency, and risk levels. Investment banking training equips professionals with a deep understanding of various financial ratios and their significance. They learn how to calculate and interpret ratios related to profitability, liquidity, solvency, efficiency, and valuation.

Comparable Company Analysis  

Comparable Company Analysis (CCA) plays a crucial role in mergers and acquisitions (M&As) due to its importance in determining the valuation of the target company. In investment banking training , you will learn how to conduct a CCA and identify a group of comparable companies in the same industry as the target company. 

By comparing the target company's financial metrics to its peers, you can identify the company's strengths, weaknesses, and positioning within the industry and provide appropriate guidance.

Discounted Cash Flow (DCF) Analysis

Discounted Cash Flow (DCF) analysis is a crucial valuation technique used in M&As. It helps determine the intrinsic value of a company. It helps project the potential cash flows of a company in the future. DCF analysis involves factors like revenue growth, operation costs, working capital requirements and the like.  

Investment banking training provides the skills in building complex financial models that are required for DCF analysis. They develop comprehensive models that incorporate projected cash flows, discount rates, and terminal values to estimate the present value of a company.

Merger Consequences Analysis

Merger Consequences Analysis helps assess the potential outcomes and impact on financial performance, operations, and value of the entities partaking in the M&A. Investment bankers conduct an extensive evaluation to identify and quantify potential synergies that may result from the merger or acquisition, encompassing cost savings, revenue growth opportunities, operational efficiencies, and strategic advantages. 

This analysis aids in estimating the financial implications of these synergies on the combined entity.

Legal and Regulatory Considerations

If you are pursuing an investment banking career , knowledge of the various legalities involved in M&As will help you nail any investment banking interview . The regulatory legalities involved in the process of M&As that partaking entities and investment banking services need to consider:-

Antitrust Laws and Regulations

Antitrust laws and regulations aim to foster fair competition and prevent anti-competitive practices. In the context of M&A, it is vital to assess whether the combination of the acquiring and target companies could potentially harm competition significantly. 

Complying with antitrust laws may involve seeking clearance from regulatory bodies or implementing remedies to address any potential anti-competitive concerns.

Securities Laws and Regulations

Securities laws and regulations are of utmost importance in M&A transactions, considering the issuance of securities or transfer of ownership interests. Compliance with these laws governs the disclosure of material information, fair treatment of shareholders, and the filing of requisite documents with regulatory entities.

Regulatory Approvals and Filings

M&A transactions often necessitate obtaining approvals from various regulatory bodies, including government agencies, industry regulators, or competition authorities. These approvals ensure adherence to specific industry regulations and are typically indispensable for proceeding with the transaction. 

Additionally, filings and disclosures like Form S-4 or 8-K, may be mandatory for furnishing relevant information about the transaction to legal authorities.

Confidentiality and Non-Disclosure Agreements

Confidentiality is crucial throughout M&A transactions. To safeguard sensitive information and trade secrets, parties involved usually enter into non-disclosure agreements (NDAs). These NDAs outline the terms and conditions governing the sharing and handling of confidential information throughout the entire transaction process.

M&A Documentation

The following M&A documents are instrumental in organising and formalising the holistic M&A process. They give clarity, safeguard the interests of all parties included, and guarantee compliance with pertinent legal and regulatory prerequisites all through the transferring process.

Letter of Intent (LOI)  

The Letter of Intent (LOI) is the first and most urgent document that frames the agreements proposed in an M&A. It fills in as the commencement for exchanges and conversations among the gatherings participating in the business procedure.

Merger Agreement  

The Merger Agreement is a legally approved contract that covers every detail of the merger. It may include crucial information like the price of purchase, terms of payment, warranties, post-closure commitments and representations. This arrangement formalises the responsibilities between the partaking parties.

Share Purchase Agreement  

The Share Purchase Agreement is a legally binding contract that oversees the assets of the target organisation being acquired. It frames the terms, conditions, and legitimate liabilities connected with the exchange of ownership interests.

Asset Purchase Agreement  

An Asset Purchase Agreement is utilised when particular assets of the target organisation are being gained. It is a legal contract that sets out the regulatory commitments attached to the procurement and division of those assets.

Confidentiality Agreements  

Confidentiality Agreements, also known as Non-Disclosure Agreements (NDAs), play a major role in protecting sensitive data collected during the M&A cycle. They lay out rules and commitments to guarantee the safe handling and non-exposure of restrictive proprietary information and secrets.

Due Diligence Checklist  

The Due Diligence Checklist is a broad list that helps direct the assessment process by framing the important documents, data, and areas to be evaluated. It works with an exhaustive and deliberate evaluation of the objective organisation's monetary, legal, functional, and business viewpoints.

M&A Case Studies   

M&A case studies serve as a hub of knowledge, enabling companies to make informed decisions and avoid common pitfalls. By delving into these real-world examples, organisations can shape their M&A strategies, anticipate challenges, and increase the likelihood of successful outcomes. Some of these case studies may include:-  

Successful M&A Transactions  

Real-life examples and case studies of M&A transactions that have achieved remarkable success provide meaningful insights into the factors that contributed to their positive outcomes. By analysing these successful deals, companies can uncover valuable lessons and understand the strategic alignment, effective integration processes, synergies realised, and the resulting post-merger performance. 

These case studies serve as an inspiration and offer practical knowledge for companies embarking on their own M&A journeys.

Failed M&A Transactions  

It's equally important to learn from M&A transactions that did not meet expectations or faced challenges. These case studies shed light on the reasons behind their failure. We can examine the cultural clashes, integration issues, financial setbacks, or insufficient due diligence that led to unfavorable outcomes. 

By evaluating failed M&A deals, companies can gain valuable insights so they can further avoid the pitfalls and consider the critical factors to build a successful M&A strategy.

Lessons Learned from M&A Deals  

By analysing a wide range of M&A transactions, including both successful and unsuccessful ones, we can distill valuable lessons. These case studies help us identify recurring themes, best practices, and key takeaways. 

They provide an in-depth and comprehensive understanding of the various pitfalls and potential opportunities involved in an M&A that can enhance their decision-making processes to develop effective strategies.

Taking up reliable investment banking courses can be instrumental in taking your career to unimaginable heights in this field. 

M&A Strategies and Best Practices   

By implementing the following M&A strategies, companies can enhance the likelihood of a successful merger or acquisition:

Strategic Fit and Synergies  

One of the key aspects of M&A is ensuring strategic fit between the acquiring and target companies. This involves evaluating alignment in terms of business goals, market positioning, product portfolios, and customer base.

Integration Planning and Execution  

A well-balanced integration plan is crucial for a successful M&A. It encompasses creating a roadmap for integrating the acquired company's operations, systems, processes, and people. 

Effective execution of the integration plan requires careful coordination, clear communication, and strong project management to ensure a seamless transition and minimise disruption.

Cultural Integration  

Merging organisations often have different cultures, values, and ways of doing business. Cultural integration is essential to aligning employees, fostering collaboration, and maintaining morale. Proactively managing cultural differences, promoting open communication, and creating a shared vision can help mitigate integration challenges and create a cohesive post-merger organisation.

Managing Stakeholders  

M&A transactions involve multiple stakeholders, including employees, customers, suppliers, investors, and regulatory bodies. Managing their expectations, addressing concerns, and communicating the strategic rationale and benefits of the deal are all crucial. 

Engaging with stakeholders throughout the process helps build trust and support, ensuring a smoother transition and post-merger success.

Risk Management in Mergers and Acquisitions  

M&A transactions involve inherent risks that need to be effectively managed. Conducting comprehensive due diligence, identifying and assessing potential risks, and developing risk mitigation strategies are essential steps. 

It's important to consider legal and regulatory compliance, financial risks, operational challenges, cultural integration issues, and potential resistance from stakeholders.

Post-Merger Performance Evaluation  

Evaluating the performance of the merged entity post-transaction is critical to assessing the success of the deal and identifying areas for improvement. This involves tracking financial performance, measuring synergies realised, monitoring customer and employee satisfaction, and conducting periodic assessments. 

Continuous evaluation helps refine strategies and ensure the realisation of intended benefits.

Conclusion   

Mergers and acquisitions (M&A) are intricate processes that require in-depth knowledge and expertise in investment banking operations. The components discussed, such as M&A documentation, case studies, and strategies, emphasise the importance of comprehensive analysis, due diligence, and risk management. 

Many students tend to pursue investment banking careers because of the comparatively high investment banking salary involved. If you are one of these enthusiasts, pursuing a Certified Investment Banking Operations Professional course from Imarticus can provide you with the investment banking certification you need to get started . 

This course help you develop the specialised skills and knowledge required for a successful career in investment banking . It covers essential topics related to M&A, financial analysis, valuation methods, and regulatory considerations, equipping learners with the necessary tools to navigate the complexities of M&A transactions.

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Related Expertise: Business Transformation , Post-Merger Integration , Corporate Finance and Strategy

Lessons from Eight Successful M&A Turnarounds

November 12, 2018  By  Ib Löfgrén ,  Lars Fæste ,  Tuukka Seppä ,  Jonas Cunningham ,  Niamh Dawson ,  Daniel Friedman , and  Rüdiger Wolf

M&A is tough, especially when it involves an underperforming asset that needs a turnaround. About 40% of all deals, on average, require some kind of turnaround, whether because of minor problems or a full-blown crisis. With M&A valuations now at record levels, companies must pay higher prices simply to get a deal done. In this environment, leaders need a highly structured approach to put the odds in their favor.

The greatest M&A turnarounds

Automotive: groupe psa + opel, biopharmaceuticals: sanofi + genzyme, media: charter communications + time warner cable + bright house networks, industrial equipment: konecranes + mhps, retail grocery: coop norge + ica norway, shipbuilding: meyer werft + turku shipyard, retail: office depot + officemax, energy: vistra + dynegy.

We recently analyzed large turnaround deals—those in which the target was at least half the size of the buyer in terms of revenue, with the target’s profitability lagging its industry median by at least 30%. Our key finding was that these deals can be just as successful as smaller deals that don’t require a turnaround in terms of value creation. However, they have a much greater variation in outcomes. In other words, the risks are greater and the potential returns are also greater. Critically, our analysis identified four key factors that lead to success in turnaround deals.

1. These buyers use a “full potential” approach to identify all possible areas of improvement. Rather than merely integrating the target company to capture the most obvious synergies, a full-potential approach generates improvements to the target company, captures all synergies, and capitalizes on the opportunity to make needed upgrades to the acquirer as well. (See the exhibit.)

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2. These buyers have a clear rationale for how the deal will create value, and they take a structured, holistic approach:

• They initially fund the journey by generating quick wins that deliver cash to the bottom line quickly, typically restructuring back-end operations to reduce costs and increase efficiency.
• Then they pivot from cost-cutting to growth measures in order to win in the medium term. They revamp the portfolio, selling off some business units and assets and buying others that align with their strategic direction.
• Finally, they invest in the future, often focusing on building digital businesses, upgrading processes with AI, and investing in R&D to secure long-term growth and expanding margins.

Winning buyers have a clear rationale, execute with rigor and speed, and address culture upfront.

3. Successful acquirers execute their plan with rigor and speed. They begin developing plans long before the deal closes, so that they can begin implementation on day one, seamlessly combining the core elements of post-merger integration and a turnaround program. These acquirers are extremely diligent in building clear milestones and objectives into the plan to ensure that key integration and improvement steps are achieved on time. Throughout the process, they move as quickly as possible, regarding speed as their friend. Moreover, they are confident enough to make their targets public and to systematically report on progress.

4. Winning acquirers address culture upfront by reorienting the organization around collaboration, accountability, and bottom-line value. Culture can often be hard to quantify or pin down, but it’s critical in shaping a company’s performance following an acquisition. (See Breaking the Culture Barrier in Postmerger Integrations , BCG Focus, January 2016.)

The case studies on the following pages illustrate these four principles. They offer clear evidence that M&A-based turnarounds may be hard but carry significant opportunity when done right.

Groupe PSA, the parent company of Peugeot, Citroën, Vauxhall Motors, and DS Automobiles, was languishing after the 2008 financial crisis. Demand was particularly slow to recover in Europe, which accounted for more than two-thirds of the company’s sales. After losing $5.4 billion in 2012 and $2.5 billion in 2013, Groupe PSA struck a deal to sell 14% of the company to Chinese competitor Dongfeng and another 14% to the French government, for $870 million each. With the capital raised, it launched a turnaround program in 2014. As part of the program, Groupe PSA bought the Opel brand, which had lost about $19 billion since 1999, from General Motors. The deal was finalized in August 2017.

The turnaround has a strong growth element with a focus on strengthening brands. A sales offensive was built on reducing the variety of models available, offering more attractive leases (possible thanks to the company’s stronger financial services capability), and maintaining discount discipline. Cost efficiency is another important element. Limiting the number of models reduces complexity across the combined group, which reduces costs in both manufacturing and R&D. The increased scale across fewer models leads to simpler procurement and more negotiating clout with suppliers.

The turnaround continued at a relentless pace through the first half of 2018, with profitability restored at Opel and margins continuing to rise for Groupe PSA as a whole.

Overall, gross margins have increased by 35% since 2013. During the same period, Groupe PSA has rebounded from losing money to an EBIT margin of 6%, in line with competitors such as General Motors and ahead of Hyundai and Kia. Perhaps most impressive, the company’s market cap has increased more than 700%. In all, the transformation has allowed Groupe PSA to resume its position as one of the top-performing automakers in the world.

Key success factors in this turnaround: Groupe PSA started the turnaround by raising capital to fund the journey. That enabled it to buy GM’s Opel unit, halt steep financial losses quickly, and generate a profit within one year of the acquisition.

Raising capital allowed Groupe PSA to buy GM’s Opel unit and generate a profit within one year.

In 2009, French pharmaceutical company Sanofi was in acquisition mode. Many of its products were losing patent protection, and the company wanted to shift from traditional drugs into biologics. One potential target was Genzyme.

From 2000 through 2010, Genzyme had grown rapidly, but manufacturing issues at two of its facilities halted production and led to a shortage of key drugs in its portfolio. Sales plunged, the US Food and Drug Administration issued fines, and investors called for management changes. But many features of the company still met Sanofi’s needs, including a lucrative orphan drug business with no patent cliff and a strong history of innovation. Sanofi made an offer: $20 billion, or $74 per share, which was roughly Genzyme’s value before the manufacturing problems hit.

Management laid out a bold ambition and moved fast. The company streamlined manufacturing, opening a new plant to reduce the drug shortage and simplifying operations to remove bottlenecks at existing plants. Next, it moved sales and marketing for some of Genzyme’s businesses, including oncology, biosurgery, and renal products, under the Sanofi brand. It also reduced the overall sales force by about 2,000 people.

Genzyme’s R&D pipeline was integrated into Sanofi, and a new portfolio review process led to the cessation of some studies and the reprioritizing of others. And about 30% of Genzyme’s cost base was reduced through the integration with Sanofi. Genzyme’s diagnostics unit was sold off, and about 8,000 full-time employees were eliminated in the EU and North America.

The moves generated positive results fast. Overall, the integration led to about $700 million in cost reductions through synergies. By 2011, the company was back in expansion mode with 5% revenue growth, increasing to 17% in 2012. Only about 13% of Sanofi’s revenue came from Genzyme products, but these were poised for strong growth, positioning Sanofi as a global leader in rare-disease therapeutics and spurring its evolution into a dominant player in biologics.

Key success factors in this turnaround: Sanofi laid out a bold ambition in its acquisition of Genzyme, and it executed a strategic repositioning with extreme speed, cutting costs and increasing top-line growth.

Genzyme executed a strategic repositioning with speed, cutting costs and increasing top-line growth.

With 8% of the US market in 2014, cable TV provider Charter Communications found itself facing fierce competition for multichannel video subscribers, who usually had bundled services with increasingly important broadband subscriptions. The threat came not only from other multichannel video providers in its markets—including direct-broadcast satellite services and large telcos—but from internet streaming services, as many cable subscribers were “cutting the cord” and streaming video over mobile and other devices.

To protect its market share and profits, Charter significantly expanded its subscriber base in 2015 by acquiring Time Warner Cable and Bright House Networks, which had a 20.8% and 3.6% share of the US cable market, respectively, paying $67 billion for the two businesses. The acquisitions made Charter the second-largest broadband provider and the third-largest multichannel video provider in the US.

With the deal closed, Charter launched a bold transformation that captured extensive synergies among the three businesses in areas such as overhead, product development, engineering, and IT, and it introduced uniform operating practices, pricing, and packaging. Most important, the company’s increased scale improved its bargaining power with content providers. Charter went beyond synergies in a full-potential plan to accelerate revenue growth, product development, and innovation through the increased scale, improved sales and marketing capabilities, and enhanced cable TV footprint brought about by the combination of the three companies. It improved products and services, centralized pricing decisions, and streamlined operations to achieve additional operating and capital efficiency.

As a result, Charter kept up its premerger growth trend and profitability, growing at an annual rate of 5.5% post-merger to reach $42 billion in revenues in 2017. In addition, Charter’s value creation significantly outperformed that of its peers, increasing annualized TSR to 289% from the closing of the transaction to the end of 2017.

Key success factors in this turnaround: Charter made a bold move in acquiring both Time Warner Cable and Bright House Networks. Management developed an extensive plan to generate operational synergies and rationalize the commercial offering of the new entity.

Charter developed an extensive plan to generate operational synergies and rationalize the new entity’s offering.

Konecranes is a global provider of industrial and port cranes equipment and services. Several years ago, in the face of increased competition, Konecranes was struggling to cut costs or grow organically. In 2016, it bought a business unit from Terex Corporation called Material Handling & Port Solutions (MHPS), its principal competitor. The MHPS business included several brands that complemented Konecranes’ products and services, along with some sizeable overlaps in technology and manufacturing networks.

Before the deal closed, Konecranes drafted an ambitious full-potential plan to generate about $160 million in synergies within three years through cost reductions and new business. That represented a 70% improvement over the joint company’s pro forma financials. The turnaround plan encompassed all main businesses and functions across both legacy Konecranes and MHPS operations.

As part of the preclose planning, Konecranes’ leaders designed an overall transformation to start after the merger was finalized. The program covered all business units and functions and was extremely comprehensive, including the following:

• Reducing procurement spending through increased volumes
• Consolidating service locations
• Aligning technological standards and platforms
• Closing some manufacturing sites
• Streamlining corporate functions
• Adopting more efficient processes
• Optimizing the go-to-market approach
• Identifying new avenues of growth

The full program consisted of 350 individual initiatives, organized into nine major work streams and aligned with the overall organization structure to create clear accountabilities and tie the program’s impact directly to financial results. Still, many of the initiatives were complex by nature, so solid planning and rigorous program management and reporting have been critical.

Konecranes also carried out a holistic baseline survey to assess the cultures of the two organizations and define a joint target culture. An extensive cultural development and communications plan featured strongly in the early days of the integration.

The company has reported on its progress to investors as part of its quarterly earnings calls, and two years into the three-year plan, it has hit or exceeded its targets. That performance has earned praise from investors, leading to a share price increase of more than 50% since the acquisition was announced.

Key success factors in this turnaround: The combination of competitors presented a clear opportunity to create value from synergies, but management took the more ambitious approach of using the deal as a catalyst for the combined entity to perform at its full potential. Hitting —and often exceeding—performance targets has led to a dramatic rise in the company’s stock price.

Konecranes used the deal as a catalyst for the combined entity to perform at its full potential.

Coop Norge ranked third in Norway’s competitive and consolidated retail-grocery landscape in 2014, with a 22.7% share. But the company faced a major strategic challenge from its two larger competitors, which were able to use their scale advantages to negotiate favorable prices from suppliers while opening new stores. A smaller player, ICA Norway, was in a more precarious position, with a 2014 operating loss of more than $57 million on revenue of $2.1 billion. An acquisition made sense. In buying ICA, Coop aimed to become the number-two player and so increase economies of scale in procurement and logistics. ICA stores in Norway were a strong strategic fit as well, complementing Coop’s existing locations.

After the acquisition closed, Coop rebranded all ICA supermarkets and discount stores to concentrate on fewer, winning formats and to fully leverage improvements and synergies in areas such as procurement, logistics, and store operations. Coop’s discount brand, Extra, was already showing good momentum in the market, and this was accelerated through the ICA Norway transaction.

The integration and rebranding created pride and momentum internally at ICA, which led to improved growth and financial performance at the acquiring company as well. Coop moved up to second place in the market, generated new economies of scale, and realized 87% of its expected results from synergies within just eight months of the close and 96% after two years. And because the company stayed true to its existing store strategy, it was able to lean on previous experience and maintain its long-term vision. Operating profits rose by approximately $270 million, from a loss of $160 million in 2015 to a profit of $106 million in 2016. Revenue during that period increased by 10.7%, to nearly $6 billion, of which ICA stores and Coop’s existing locations accounted for 7.8 and 2.9 percentage points, respectively.

Coop Norge’s early successes in the integration created strong momentum and a culture of success.

Key success factors in this turnaround: The early successes achieved in the integration created strong momentum and a culture of success, enabling the combined entity to increase both revenue and profits in a highly competitive market.

In the early 2010s, the global shipbuilding industry declined significantly, in part because of a contraction in the demand for ships. That left many shipyards—including the Turku yard, which operated in the sophisticated niche of cruise ships and ferries—in need of cash. When Turku’s owner, STX Finland, verged on insolvency in 2014, the Finnish government (which had a stake in STX) began looking for a new owner. Meyer Werft, a leading European shipbuilder, believed that the Turku shipyard could be operated profitably and bought 70% of the yard in September 2014. As part of the deal, Turku secured two new cruise ship projects. With the orders confirmed, Meyer Werft bought the remaining shares, becoming sole owner.

Renamed Meyer Turku Oy, the company began to integrate the shipyard’s operations and find synergies in development, procurement, and other support functions. Having negotiated up-front for new business, it was able to fill Turku’s production capacity, benefit from increased scale, and begin to boost profitability almost immediately. Critically, the deal helped restore trust among employees, which extended to other important stakeholders such as customers and lenders. Such trust is essential in an industry that hinges on building a small number of very large projects, and it was fostered by Meyer Werft’s delivery on promises right from the start.

Meyer Werft then looked to planning growth in the longer term: increasing capex to boost capacity—and profitability—still further and investing in a new crane, cabin production, and a new steel storage and pretreatment plant while modernizing existing equipment. It also entered into a joint R&D project with the University of Turku to develop more sustainable practices across a ship’s life cycle—from raw materials to manufacturing processes and beyond. And it hired 500 new workers, partially replacing retiring employees, in 2018.

As a result, the company increased revenues from $590 million in 2014 to $970 million in 2017, an annual growth rate of more than 18%. It also increased profit margins to 4% in 2017, up from a loss of 5% in the acquisition year. The company now has a stable order book out to 2024, and productivity continues to climb.

Key success factors in this turnaround: In addition to making operational improvements, Meyer Werft was able to foster trust among employees and customers by delivering on its promises and showing its commitment through long-term investment.

Meyer Werft fostered trust among employees and customers by delivering on its promises.

In early 2013, Office Depot and OfficeMax were in a similar situation: online retailers were threatening their business. They agreed on a merger, with the goal of generating synergies by reducing the cost of goods sold, consolidating support functions to cut overhead, and eliminating redundancies in the distribution and sales units.

Because the two companies were merging as equals—rather than one buying the other— some decisions were difficult to make before the close (for example, which IT system the combined entity would use and where headquarters would be located). But management was able to define synergy targets and begin planning the integration during the six months before the close. The companies also created an integration management office (IMO) that addressed areas that were critical for business continuity, specifying which units would be integrated and which would be left as is.

The IMO created playbooks for 15 integration teams, addressing finance, marketing, the supply chain, and e-commerce operations, and developed a plan for communication, talent management, and change management for the overall effort. It categorized all major decisions into two groups: those that could be made prior to the close (because the steering committee was aligned) and those that couldn’t be made during that period. For decisions in the second category, the IMO laid out the two or three best options to consider. Critically, the IMO’s rigorous plans included timelines for how the businesses would evolve over the first, second, and third years of the merger, helping to align functions and manage interdependencies.

Once the deal closed, all this preparation allowed the two organizations to start the integration process immediately on day one. Within weeks, they had agreed on a leadership team for the combined entity, a headquarters site, and an IT platform. The organization was largely redesigned in just two months—a remarkably rapid effort given that it ultimately affected about 9,000 employees.

Most important, the smooth integration process allowed the companies to be extremely rigorous in capturing more synergies—and doing it faster—than anticipated. For example, they integrated the e-commerce businesses in a way that allowed them to retain most key customers. In the first year after the deal closed, the company captured cost savings close to three times management’s original targets; cost savings of the end-state organization were 50% more. In all, the merger unlocked about $700 million, putting the new company in a much better competitive position.

An extremely rigorous integration plan allowed Office Depot and OfficeMax to exceed cost savings targets.

Key success factors in this turnaround: Office Depot and OfficeMax merged in response to the threat of online competition. An extremely rigorous integration plan allowed the combined business to dramatically exceed its cost savings targets.

Texas-based Vistra Energy operates in 12 US states and delivers energy to nearly 3 million customers, with a mix of natural gas, coal, nuclear, and solar facilities enabling about 41,000 megawatts of generation capacity. It was formed in October 2016 when its predecessor emerged from a protracted bankruptcy process.

At the conclusion of bankruptcy proceedings, Vistra underwent a corporate restructuring, moving from a siloed operating model to a unified organization with a centralized leadership team and common objectives. New governance structures facilitated more consistent and rigorous corporate decision making, with an emphasis on capital allocation and risk management. In addition, management immediately launched a turnaround effort to reduce costs and improve performance across the entire organization.

In all, the company managed to reduce costs and enhance EBITDA by approximately $400 million per year, exceeding its original target by $40 million without any drop in service levels or safety standards. At the same time, investments in new service offerings—many enabled by digital technology—boosted customer satisfaction.

In 2017, Vistra announced the acquisition of Dynegy, one of its largest peers, resulting in the largest competitive integrated power company in the US. The combined entity offers significant synergies, with Vistra now on track to deliver $500 million of additional EBITDA per year, along with annual after-tax free cash flow benefits of nearly $300 million and $1.7 billion in tax savings. The deal also allows Vistra to expand into new US markets, diversifying its operations and earnings, reducing its overall business risk, and creating a platform for future growth.

The addition of Dynegy also supports Vistra’s shift toward a more modern power generation fleet based on natural gas. The company preceded that deal with the acquisition of a large, gas-fueled power plant in west Texas, and it also retired several uneconomical coal-burning facilities. In all, Vistra’s generation profile has evolved from approximately two-thirds coal-fueled sources to more than 50% natural gas and renewables.

With these measures—a successful turnaround followed by two strategic acquisitions—Vistra has positioned itself to sustainably create value for its shareholders in a very competitive industry.

Key success factors in this turnaround: Vistra’s acquisition of Dynegy represented both a pivot to growth and an opportunity to extend cost savings to an acquired operating platform.

Managing Director & Partner

Managing Director & Senior Partner; Global Leader, BCG Transform Practice

Project Leader

Partner & Director, Change, Transaction & Integration Excellence

Managing Director & Senior Partner; Global Leader of Transactions & Integrations

Los Angeles

Managing Director & Senior Partner

ABOUT BOSTON CONSULTING GROUP

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Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

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Mergers and acquisitions

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Strategic Analysis for More Profitable Acquisitions

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• From the July 1979 Issue

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Shareholder Votes for Sale

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Ready for Growth, But Not Prepared

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All the Wrong Moves (HBR Case Study)

• January 01, 2006

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DuPont’s CEO on Executing a Complex Cross-Border Acquisition

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Diversification via Acquisition: Creating Value

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TruthCRM Competitive Auction in Mergers and Acquisitions: Instructions for High Flyer Team

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Oracle's Hostile Takeover of PeopleSoft (A)

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Itau Unibanco (A): The Merger Process

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Walmart-Flipkart: A Deal Worth Its Price?

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Parachute: Competition and Collaboration in the Market to Save Lives

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The Oracle of Omaha Meets the Visionaries of Galillee

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Note on Postmerger Integration

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Mercer Management Consulting (B)

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Tesla: The SolarCity Acquisition

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• August 02, 2017

PeopleSoft Finally Accepts Oracle's Offer (B)

• June 13, 2006

Daimler-Benz A.G.: Negotiations Between Daimler and Chrysler

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• Robert E. Spekman
• Melinda Davies
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• October 01, 1998

Intellikine Teaching Note

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• February 01, 2013

Seventh Generation and Unilever: Would an Acquisition Affect Sustainability?, Teaching Note

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Popular Topics

Partner center.

Mergers and Acquisitions (Online)

Strategize and execute successful deals.

Get Your Brochure

June 25, 2024

9 weeks, online 4-6 hours per week

PROGRAM FEE

US$3,700 and get US$370 off with a referral

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Achieve Growth with the Strategic Lever of Mergers and Acquisitions

Mergers and acquisitions (M&A) are on the rebound, driven by favorable economic conditions and the potential to accelerate digital transformation with technologies like GenAI. However, a historically uncertain landscape and the inherent risks of M&A require that deals be fully vetted and carefully planned. The nine-week Mergers and Acquisitions (Online) program from Columbia Business School Executive Education will help you navigate the complexities of the M&A process. Through live sessions with world-class faculty, case studies, assignments, and activities, you will learn a proven offensive and defensive framework and develop a comprehensive understanding of mergers and acquisitions, from strategy to execution.

Respondents listed valuation of assets as a challenge to M&A success.

SOURCE: DELOITTE HEADS OF M&A SURVEY

Business leaders expect to use M&A to accelerate the adoption of technology and technology-related processes.

SOURCE: PwC

M&A strategy is the single most important element in achieving a successful M&A deal.

SOURCE: Deloitte

Key takeaways.

The Mergers and Acquistions (Online) program will enable you to:

• Deep-dive into the M&A process from deal sourcing through transaction closing
• Analyze the strategic rationale for and against an M&A transaction
• Explore the role of valuation in the M&A process and examine different valuation methods and the math behind the deal
• Explain how to capture value through M&A and create synergies of revenue and cost
• Examine the best practices of due diligence, deal documentation, and transaction structuring in M&A transactions
• Evaluate the M&A process of a real-world merger and determine whether the parties involved derived the "benefit of the bargain"

Who Should Attend

This program is intended for those who have experience in corporate finance, capital markets, or investment management. It is highly recommended that participants have prior knowledge of topics such as discounted cash flow models; risk and return; capital asset pricing model; dividend policy; asset valuation; fixed income; and behavioral finance.

Senior executives who set the strategic course for growth and oversee the firm’s investment portfolio

Representative roles include:

• Chief Executive Officer
• Chief Operating Officer
• Chief Investment Officer
• Chief Financial Officer
• Consulting Director
• Corporate Vice President
• Director Of Financial Reporting/Financial Fervices/Regulatory
• Affairs/Risk Management

Mid-level managers who serve in finance or investment functions and play a key role in the financial matters of the organization

• Financial Analyst
• CPA/Accountant
• Investment Manager
• Acquisition/Equity Manager

Consultants, Legal Counsel, and Advisors who serve in a role of sourcing, executing, managing, or integrating M&A transactions, or who hold relationships with investment banks and private investors

• Management Consultant
• Investment Banker
• Financial Advisor
• Private Banker

Program Modules

Review the key terminology of the M&A landscape and learn a five-point framework for remaining disciplined during the M&A process.

Examine the six key topics to be addressed in the M&A process: strategic alternatives; screening candidates; valuation, synergies, and pro-forma analysis; interloper analysis; form of consideration; and tactical approach issues and Plan B.

Explore the role that valuation plays in the M&A process and evaluate whether an M&A transaction will add value.

Review the most common 'deal math' calculations for an M&A transaction including: premium; fully diluted shares outstanding (FDSO); transaction values; transaction multiples; transaction exchange ratio and pro forma ownership (only in stock deals) and contribution analysis (only in stock deals).

Explain the due diligence process–including financial, legal, and commercial–and its role in ensuring that both parties can protect their benefit of the bargain.

Describe the principles and mechanics of deal documentation and learn about various transaction structures, including direct mergers, triangular mergers, consolidations, and asset sales.

Discuss some key questions that both parties must address throughout the M&A process and some guidelines for friendly versus hostile deals. Gain insight into the roles of the involved stakeholders.

The final project brings together all of the concepts taught in this program and consists of two parts. Part one includes general questions about merger agreements, valuation, and due diligence. Part two relates specifically to the Kenneth Cole Productions case and includes reference documents (e.g., Schedule 14A) and presentations from the financial advisor.

Program Experience

World-Renowned Faculty

Learn from accomplished faculty, and industry experts whose diverse backgrounds encompass a broad range of disciplines

Peer Interaction

Stimulating discussions with like-minded global peers expand your professional network and build a supportive community

Through exploratory sessions, examine practical examples and find innovative solutions to strategic challenges

Live Faculty Sessions

Get actionable insights in live online interactions with faculty who are recognized leaders in their fields

Engaging Assignments and Activities

Hone business acumen and executive skills with try-it activities that help you redefine your potential

Past Participant Profile

Past participants of the Mergers and Acquisitions (Online) program come from diverse backgrounds, industries, and experiences.

Average years of work experience:

• Less than 10 years: 12%
• 10 to 14 years: 16%
• 15 to 19 years: 22%
• More than 20 years: 50%

Top industries:

• Entrepreneurship
• Finance and Insurance
• General Management

Top functions:

• Finance Accounting

Top countries:

• United States
• United Arab Emirates

Note: Data from across previous cohorts

Participant Testimonials

“The final exam and the KCP analysis had the highest impact to my learning because it gave me the opportunity to utilize and apply the program learnings from each module to a real-world setting.” — Raymond Pustinger, CEO, Armada Power

“The program gave a very comprehensive overview of the most relevant topics in public M&A deals. The valuation part was the best one.” — Paolo Scalzini, Senior Director Corporate Development - Global Team, JSR Life Sciences

“The program covered all the important angles and provided just the right level of detail to understand and support an M&A transaction.” — Jamal Mosallam, Chief Financial Officer, Simon Group Holdings

“Overall experience was excellent. Some of the aspects that I enjoyed are the video instructions, summary notes, office hours, and instructor webinars.” — George Dyche, Vice President Product Management, Industrial, Brady Corporation

Program Faculty

Donna M. Hitscherich

Senior lecturer, business, finance, and economics. co-director, private equity program, columbia business school.

Donna M. Hitscherich Senior Lecturer, Business, Finance, and Economics. Co-director, Private Equity Program, Columbia Business School At Columbia Business School, Donna Hitscherich serves as co-director of the Private Equity Program and is a Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics. She teaches Corporate Finance, Business Law, Mergers and Acquisitions, and Advanced Corporate Finance. Prior to her academic career, she was an investment banker and mergers and acquisition specialist, working with CS First Boston, JP Morgan & Co Inc., and Bank of America Securities. Prior to those roles, she was a corporate lawyer, specializing in mergers and acquisitions. She holds a BS and JD from St. John’s University and an MBA from Columbia Business School. Hitscherich is also a certified paramedic in the State of New York.

Certificate

Upon completion of the Mergers and Acquisitions (Online) program, you will receive a certificate of participation from Columbia Business School Executive Education. This certificate also awards two credits towards the Certificate in Business Excellence, which grants select alumni and tuition benefits. Learn More

Your digitally verified certificate will be issued in your legal name and emailed to you, at no additional cost, upon completion of the program, including all modules of the program (online, in person, or live online, inter-module). All certificate images are for illustrative purposes only and may be subject to change at the discretion of Columbia Business School Executive Education.

How do I know if this program is right for me?

After reviewing the information on the program landing page, we recommend you submit the short form above to gain access to the program brochure, which includes more in-depth information. If you still have questions on whether this program is a good fit for you, please email [email protected], and a dedicated program advisor will follow-up with you very shortly.

Are there any prerequisites for this program?

Some programs do have prerequisites, particularly the more technical ones. This information will be noted on the program landing page, as well as in the program brochure. If you are uncertain about program prerequisites and your capabilities, please email us at the ID mentioned above.

Note that, unless otherwise stated on the program web page, all programs are taught in English and proficiency in English is required.

What is the typical class profile?

More than 50 percent of our participants are from outside the United States. Class profiles vary from one cohort to the next, but, generally, our online certificates draw a highly diverse audience in terms of professional experience, industry, and geography — leading to a very rich peer learning and networking experience.

What other dates will this program be offered in the future?

Check back to this program web page or email us to inquire if future program dates or the timeline for future offerings have been confirmed yet.

How much time is required each week?

Each program includes an estimated learner effort per week. This is referenced at the top of the program landing page under the Duration section, as well as in the program brochure, which you can obtain by submitting the short form at the top of this web page.

How will my time be spent?

We have designed this program to fit into your current working life as efficiently as possible. Time will be spent among a variety of activities including:

• Engaging with recorded video lectures from faculty
• Attending webinars and office hours, as per the specific program schedule
• Reading or engaging with examples of core topics
• Completing knowledge checks/quizzes and required activities
• Engaging in moderated discussion groups with your peers
• Completing your final project, if required

The program is designed to be highly interactive while also allowing time for self-reflection and to demonstrate an understanding of the core topics through various active learning exercises. Please email us if you need further clarification on program activities.

What is it like to learn online with the learning collaborator, Emeritus?

More than 300,000 learners across 200 countries have chosen to advance their skills with Emeritus and its educational learning partners. In fact, 90 percent of the respondents of a recent survey across all our programs said that their learning outcomes were met or exceeded. All the contents of the course would be made available to students at the commencement of the course. However, to ensure the program delivers the desired learning outcomes the students may appoint Emeritus to manage the delivery of the program in a cohort-based manner the cost of which is already included in the overall course fee of the course. A dedicated program support team is available 24/5 (Monday to Friday) to answer questions about the learning platform, technical issues, or anything else that may affect your learning experience.

How do I interact with other program participants?

Peer learning adds substantially to the overall learning experience and is an important part of the program. You can connect and communicate with other participants through our learning platform.

What are the requirements to earn the certificate?

Each program includes an estimated learner effort per week, so you can gauge what will be required before you enroll. This is referenced at the top of the program landing page under the Duration section, as well as in the program brochure, which you can obtain by submitting the short form at the top of this web page. All programs are designed to fit into your working life. This program is scored as a pass or no-pass; participants must complete the required activities to pass and obtain the certificate of completion. Some programs include a final project submission or other assignments to obtain passing status. This information will be noted in the program brochure. Please email us if you need further clarification on any specific program requirements.

What type of certificate will I receive?

Upon successful completion of the program, you will receive a smart digital certificate. The smart digital certificate can be shared with friends, family, schools, or potential employers. You can use it on your cover letter, resume, and/or display it on your LinkedIn profile. The digital certificate will be sent approximately two weeks after the program, once grading is complete.

Can I get the hard copy of the certificate?

No, only verified digital certificates will be issued upon successful completion. This allows you to share your credentials on social platforms such as LinkedIn, Facebook, and Twitter.

Do I receive alumni status after completing this program?

No, there is no alumni status granted for this program. In some cases, there are credits that count toward a higher level of certification. This information will be clearly noted in the program brochure.

How long will I have access to the learning materials?

You will have access to the online learning platform and all the videos and program materials for 12 months following the program start date . Access to the learning platform is restricted to registered participants per the terms of agreement.

What equipment or technical requirements are there for this program?

Participants will need the latest version of their preferred browser to access the learning platform. In addition, Microsoft Office and a PDF viewer are required to access documents, spreadsheets, presentations, PDF files, and transcripts.

Do I need to be online to access the program content?

Yes, the learning platform is accessed via the internet, and video content is not available for download. However, you can download files of video transcripts, assignment templates, readings, etc. For maximum flexibility, you can access program content from a desktop, laptop, tablet, or mobile device. Video lectures must be streamed via the internet, and any livestream webinars and office hours will require an internet connection. However, these sessions are always recorded, so you may view them later.

Can I still register if the registration deadline has passed?

Yes, you can register up until seven days past the published start date of the program without missing any of the core program material or learnings.

What is the program fee, and what forms of payment do you accept?

The program fee is noted at the top of this program web page and usually referenced in the program brochure as well.

• Flexible payment options are available (see details below as well as at the top of this program web page next to FEE ).
• Tuition assistance is available for participants who qualify. Please email [email protected].

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Yes, you can do the bank remittance in the program currency via wire transfer or debit card. Please contact your program advisor, or email us for details.

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Yes! Please email us with the details of the program you are interested in, and we will assist you.

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Please email us your invoicing requirements and the specific program you’re interested in enrolling in.

Is there an option to make flexible payments for this program?

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Emeritus collects all program payments, provides learner enrollment and program support, and manages learning platform services.

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For the program refund and deferral policy, please click the link here .

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Mergers and Acquisitions

Choose a session:, 14 jul 2024 – 19 jul 2024.

​Tackle the entire M&A process through an interdisciplinary curriculum and a hands-on, weeklong team simulation project.

Through a dynamic mix of lectures, case studies, class discussions, hands-on learning, and visits from guest speakers, this program provides critical insights and powerful tools for the successful formulation and execution of an M&A strategy — one that creates true value for your organization. At the end of each day, you’ll put classroom learning into action, applying key concepts to a simulated merger deal. By combining the expertise of Stanford’s strategy, finance, accounting, and organizational behavior faculty, Mergers and Acquisitions offers an interdisciplinary overview of the major elements of M&A transactions. You will examine all of the key aspects of a merger: target selection, alternative valuation and pricing models, deal design, negotiation strategies, accounting and tax planning, and post-merger integration planning and execution. And you will cover these essential concepts in a sequential order that simulates the M&A process.

Key Benefits

Learn the strategic, financial, legal, organizational, and cultural factors to consider in order to execute a successful merger or acquisition.

• Enhance your financial valuation skills.
• Formulate M&A strategies.
• Increase your awareness of the common pitfalls of failed M&As.
• Develop the critical competencies needed for successful post-merger integration and performance.

Who Should Attend?

• Senior-level executives and entrepreneurs with at least 10 years of management experience whose businesses are potential acquirers or targets for acquisition by other companies
• Examples of appropriate functions and titles: business development, corporate development, finance, chief executive officer, general counsel, general manager, strategic planner, and banker
• Previous M&A experience not required

At-a-Glance

Application requirements.

Qualified candidates are admitted on a rolling, space-available basis. Early applications are encouraged.

Payment Information

The program fee includes tuition, private accommodations, all meals, and course materials.

Payment is due upon admission. Your space is secured upon receipt of full payment.

Awarded Upon completion

Program overview, learn more about the program.

Explore our carefully designed curriculum, and go deeper with select course descriptions or a sample schedule.

Learn more about our past participants, and find out if the program is right for you.

Faculty Leadership

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26 Jan 2025 – 31 Jan 2025 In-Person

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23 Feb 2025 – 19 Apr 2025 In-Person

Associated program Topics

• Accounting,
• Negotiation,
• In-Person (Stanford)

Program dates, fees, and faculty subject to change. Consistent with its non-discrimination policy, Stanford’s programs are open to participants regardless of race, color, national or ethnic origin, sex, age, disability, religion, sexual orientation, gender identity or expression, veteran status, marital status or any other characteristic protected by applicable law.

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JPMorgan Chase & Co.'s growth through mergers and acquisitions

Table of contents.

JPMorgan Chase & Co. is an American multinational investment bank and financial services institution that’s ranked No.1 in the United States and 5th in the world.

Standing today on the base of its 1200 predecessor financial companies and banks, JP Morgan Chase’s history dates back to 1799.

JPMorgan Chase is a vast network of subsidiaries and companies across the globe dealing in all fields of finance, ranging from asset management and investment banking to private banking and financial advisory. JPMorgan Chase’s three primary business segments include:

• Consumer and Community Banking
• Corporate and Investment Banking
• Commercial Banking and Asset Management

JP Morgan Chase's market share and key statistics from 2021

• Net Revenue of  $125.3 billion
• Net Income of  $48.3 billion
• Assets under management worth  $2.5 trillion
• Total assets worth  $3.7 trillion  globally
• Earnings per share (EPS) of  $15.3
• Stock price of  $158.4  as of December 2021
• Market Capitalization worth  $336.8 billion
• More than  270,000  employees worldwide
• Operations in more than  60  countries
• Global market share of  8%  in investment banking
• Market share of  24.7 percent  in the US banking industry
• Ranks  24th  on Fortune 500
• #1 bank  in the world by market cap
• World’s  4th largest  public company

Let’s go through the tumultuous history of JPMorgan Chase and find out how it climbed to the top of the banking and financial services industry.

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Humble beginnings: How did JP Morgan Chase start?

The JP Morgan Chase we see today is a product of dozens of mergers and acquisitions in the past two centuries – the major one being of JP Morgan and Chase Manhattan.

The history of Chase goes as far back as 1799, when the third-oldest bank in the US opened, whereas JP Morgan’s history starts in the early 1800s.

Let’s take a look at how one of the biggest banks in the US and the world came into being and evolved over time.

Chase Manhattan Begins As The Bank of Manhattan

Chase Manhattan was founded in 1799 as a water supply company called the Manhattan Company.

The company’s founders actually intended to turn it into a banking company later on. They wanted to challenge the hegemony of the two key banks at that time: the Bank of the United States and the Bank of New York. The Bank of Manhattan opened the same year making it the third-oldest bank in the US.

The founding charter of the bank was quite lax, which enabled the management to loan out to several corporations and individuals, especially in the 1820s. 

Soon enough, the bank was expanding exponentially. The massive public construction and need for financing in the early 1800s augmented the bank’s revenues in the financial sector.

How Did J.P Morgan Start?

The roots of Morgan, the second important company in JPM’s history, go back to 1838 when a banker named George Peabody started a banking firm.

Mr. John Junius Morgan became a partner and later took over the firm. His son, Junius Pierpont Morgan renamed the business J.P Morgan and Co. in 1890.

J.P. Morgan played a key role in uplifting several businesses in the US, including AT&T and General Electric, by providing financing. 

The bank held immense power in the financial sector, so much so that, in the 1907 crisis, J.P. Morgan was a key partner of the Federal Reserve (FED) in ending the crisis and dealing with the aftershocks. 

In the 1929 stock market crash, however, J.P. Morgan, like other banks, was not able to bail out the banking system even after using their own money, and the depression deepened, leaving factories closed, banks failed, regulators furious, and people anxious.

Wiggin’s Business Strategy For Chase National Bank

The Chase National Bank was established in 1877, and it would soon grow and become a force to be reckoned with in the 1900s.

Initially, the bank made slow progress. Only when renowned banker, Henry Wiggins joined as CEO did Chase National start penetrating the banking market and growing exponentially.

He prioritized diversifying the services of the bank. The number of corporate accounts began to skyrocket as the bank started providing trust services, bonds, and stock underwriting. Wiggins also hired directors from top financial institutions across the globe as he firmly believed that the leadership and senior management were crucial to achieving success.

The most remarkable feat of Wiggins was the mergers and acquisitions he was able to pull off. In the 1920s and 30s, six major banks in the US merged with Chase, including the massive Equitable Company, which had more than a billion reserves at that time. By the end of the 50s, Chase had become the largest bank in the world.

However, the era of Wiggins was not all sunshine and roses as he had to resign, and Winthrop Aldrich replaced him. Toward the second World War, Aldrich made several structural changes to breathe new life into the bank after the Wall Street Crash of 1929.

Key Takeaway 1: Start Today And Continue To Make Iterative Improvements In Your Offerings

Lofty ambitions. Grand plans. Unparalleled success. None of them can be achieved overnight. The first and foremost thing every business needs to do is take the leap of faith and just start wherever they are with whatever they have.

Chase Manhattan kicked off its operations as a water supply company. JP Morgan and Co. was set up by a banking executive and continued to reinvent itself. Both of these incredible companies went through a series of trials and tribulations but kept on improving, innovating, and pouncing on opportunities. All of this, in turn, helped them grow and make an impact.

The 20th Century: JP Morgan's acquisition strategy

Both Chase and JP Morgan were making rapid progress and hence, it didn’t come as a surprise that they became rivals in the financial sector.

Post World War II, a major merger took place. Chase reached new heights but started facing issues later on as the US dealt with the Third World Debt crisis.

The Bank of Manhattan merges with the Chase National Bank

In 1955, Chase National and Bank of Manhattan merged, forming one of the biggest banks of that time.

One of the key personnel in the merger was David Rockefeller. He had joined the company as an assistant manager and worked his way up the hierarchy. As the merger concluded, he became vice president. 14 years later, he was named chairman of the newly incorporated Chase Manhattan Corporation.

Under his leadership, the bank continued to expand. As the CEO, Rockefeller quickly rose to prominence as a significant global power broker. He started traveling widely and engaging with influential corporate and political figures all over the world. 

Rockefeller used the bank to advance the American foreign policy he believed to be desirable as a result of his prominent international standing. As one of the cornerstones of the American establishment, his sway over the Council of Foreign Relations was quite a lot.

Chase faces an existential threat

For the bank, the 1970s was a challenging decade.

Due to regional banks' decreasing reliance on Chase for their development and growth, as well as the fact that they no longer needed loans from the "banker's banker," it suffered considerable domestic losses.

In addition, Chase incurred large losses in subprime loans to South American nations, which led to the FED listing it as a "problem bank." Despite the fact that throughout this roughly $4 billion period the company's overseas income rose to more than sixty percent of its overall income, the bank struggled to compete with Citibank's explosive growth. Chase still remained the third-largest bank in the nation.

The issue of subprime loans continued in the 80s. As several governments and major corporations defaulted on their loans, Chase incurred heavy losses. The workforce was cut and the stock price plummeted. In fact, the bank reported a loss in 1987, the worst year for the banking industry. Rockefeller retired and picked Willard Butcher as his successor. Butcher left early as the stakeholders decided to tackle the crisis by forming a new team.

How did Chase revamp itself?

The new CEO, Thomas Labrecque, began to shift focus back to domestic operations.

Several operations outside the US and even outside New York were eliminated. The workforce was further cut by 10%. This was opposite to the status of its competitor, Citigroup, which was a global bank.

Labrecque recognized the significance of transforming using innovative technologies. The bank started developing a long-term technological strategy and even invested half a billion dollars to upgrade its information system. It also entered the new arena of online banking and teamed up with prominent tech companies Microsoft and America Online.

Key Takeaway 2: Develop an alternative plan and be ready to adapt fast

Let’s face it: it’s not going to work out according to your plans. The same way it didn’t for J.P Morgan and Chase Manhattan. High domestic losses, being listed as a "problem-bank", and tarnished reputation were just some of the problems faced by Chase. Yet, it not only persevered but thrived as well.

How? By taking a few hard, unpopular decisions such as cutting the workforce, proactively forming new strategies, and ensuring the leadership has the vision to help the company succeed.

Remember that there will be numerous challenges along the way – that’s just how the world of business operates as it takes no prisoners – and so you’ll have to adapt and plan ahead.

The merging of two big banks and the birth of JP Morgan

As Chase was recovering from a tumultuous period and JP Morgan was slowly expanding, the time was close for the historic merger between the two.

Chase merged with the massive Chemical Banking. Only 5 years later, JP Morgan Chase & Co. was formed and the combined assets and resources enabled the company to begin its journey from good to great.

While Labrecque made efforts to restructure Chase and recover from losses, profit and growth prospects were still not ambitious. The margins were still low, and the stock price had yet to recover.

At last, the much-anticipated merger took place between Chase and the Chemical Banking Corporation in 1995. Considering the size of Chemical, it may even be considered a sort of acquisition rather than a merger. The combined assets were 300 billion, and the bank was now the largest one in the US!

What Was the History of Chemical?

Similar to Chase, the Chemical Bank was initially started as a manufacturing entity. The banking arm was later added to it. Its history dates back to 1844, when it was incorporated as a bank.

It managed to survive the depression of 1857, and by the end of the 19th century, it was one of the largest banks in the country. However, its growth remained stagnant for the next few decades. It was after diversification into other finance fields and overseas expansion that Chemical regained its growth momentum. By the 1950s, it had become the seventh largest bank in the US

Towards the 1990s, Chemical expanded rapidly but had to suffer from similar issues as Chase due to the Third World debt crisis. Chemical merged with the Manufacturers Hanover Corporation, making it the largest merger in US history at the time. The bank was now the fifth-largest in the states.

The merger with Chase in 1995 was a sigh of relief for both entities as they were recovering from the subprime debt issue. The bank was now one of the biggest ones in the country and a leader in several banking areas.

Towards the end of the century, the bank made a few key acquisitions of several investment firms in the US. Chase increased its footprint in investment banking by purchasing Robert Fleming Holdings, setting the stage for a stronger presence not just in Europe but also in the Asian region. But Chase had its sights set on even greater things, soon making the announcement that it was joining forces with JPM.

The Iconic Merger of J.P. Morgan and Chase Manhattan

At the turn of the century, in 2000, J.P. Morgan merged with the Chase Manhattan Corporation, becoming J.P. Morgan Chase & Co. – the global financial powerhouse we know today.

This was long time coming as just a couple of years prior to it, J.P. Morgan made public its intention to merge with another bank in order to augment its offerings and solidify its position as one of the leading financial institutions. 

The Chase Manhattan Corporation, with its strong commercial and investment banking, was the perfect match for J.P. Morgan, which was dominant in debt and equity securities underwriting. With assets north of 650 billion, the bank now was only behind Bank of America and Citigroup in size.

Key Takeaway 3: Strategic Acquisitions Can Unlock Exponential Growth

Growth of a business doesn’t have to be linear. It can be exponential – but only if you have the right business strategies in place.

Strategic acquisitions are a proven and time-tested way of boosting business growth. First Chase merged with Chemical Banking and then just a few years later, Chase acquired JP Morgan, becoming J.P. Morgan Chase & Co.

These mergers and acquisitions helped J.P. Morgan Chase gain greater financial strength to be bold and take risks, acquire market share, reduce overheads, and offer a wide variety of quality products and services to its customers.

JP Morgan Chase's growth in the 21st century

JP Morgan Chase’s illustrious history has been well documented – there’s no doubt about it.

But if there was a time period that was most crucial for the company’s success and standing today, it was the two decades from 2000-onwards.

During the sensitive period post the dot-com bubble, the global financial crisis in 2007-08, the rise of digital banking and Industry 4.0, and the Covid-19 pandemic in 2020 and beyond, the company faced an array of challenges and opportunities faced. Yet, it continued to grow due to its business strategy.

J.P. Morgan Chase & Co enhances its services with further acquisitions

In 2004, J.P. Morgan Chase & Co. merged with Bank One in a bid to leverage the latter’s consumer banking business that can complement its own well-established investment and commercial banking business, making is ready to take on the largest bank in the United States – Citigroup.

Plus, the synergies would enable the JPMorgan Chase & Co. to reform the company, enhance business operations, and cut down costs. The icing on the cake was bringing Jamie Dimon, the CEO of Bank One, as the president and COO of the merged entity. He soon went on to become the CEO of J.P. Morgan Chase & Co. and led it to greater heights.

In 2006, Chase purchased New York Mellon’s retail and small business banking network, expanding its footprint in New York, New Jersey, and Connecticut and Collegiate Funding Services, an education finance company.

JPMorgan Chase & Co. continued its acquisitions strategy even during the most challenging times of all – the subprime mortgage meltdown and subsequent 2007/08 financial crisis. It acquired the investment bank Bear Stearns and the banking operations of Washington Mutual. This not only helped prevent a systemic crisis but also bolstered JPMorgan and added to its portfolio of companies.

What’s worth noting here is that JPMorgan Chase & Co. stood beside and worked alongside the government during the most critical time.

In 2010, the company acquired J.P. Morgan Cazenove having initially operated as a joint venture with the UK investment bank, Cazenove. The very next year, in 2011, Chase led General Motors historic initial public offering (IPO) – the world’s largest IPO back then, highlighting its stature as the world’s premier financial services company.

JP Morgan Chase’s Digital Transformation Strategy

When it comes to digital transformation, Chase has been ahead of its time with an eye on the future. 

While it is indeed a traditional organization with a long, illustrious history, JP Morgan Chase is constantly modernizing and staying a step ahead of the latest trends, including cloud computing, machine learning, artificial intelligence, and blockchain among others to offer a holistic digital experience to cater to its customers’ ever-changing needs.

JP Morgan Chase & Co’s Digital Transformation From 2010 to Present

With the financial crisis behind it, JPMorgan Chase & Co. prepared itself to become future-ready.

Chase released mobile banking features in 2010, empowering its customers to manage their accounts and finances, seamlessly. 

Plus, the company announced the use of supercomputers to enhance overall business operations and customer experience. 

In 2019, JP Morgan launched JPM Coin – a digital token to settle transactions between its wholesale payment business’ clients. Just a couple of years later, in 2021, JPMorgan Chase launched an app-based current account. Then in 2022, JP Morgan Chase embraced the much talked about blockchain technology for collateral settlements.

JP Morgan Chase & Co.'s sustainability initiatives

No, JPMorgan Chase & Co. is not just a global leader in financial services catering to the needs of the world’s most important corporations and government. JPMorgan Chase & Co. is much more than that. It’s a socially responsible firm that goes above and beyond to make the world a better place.

Following are a few of the steps Chase has taken over the years to do just that:

• Joined the 100,000 Jobs Mission to promote hiring of U.S. military veterans and military spouses.
• Launched Women on the Move initiative to empower women in the workplace
• Set up a Global Health Investment Fund to finance final-stage drug, vaccine, and medical device studies to find healthcare solutions
• Initiated a New Skills at Work program and invested up to $600 million to upskill people to stay relevant in a dynamic working world
• Committed $100 million to support and scale efforts to transform Detroit’s economy
• Implemented New Skills for Youth program to address the economic opportunity crisis young people face and enable them to land jobs
• Doubled down on investing in world’s communities and cities that have been ignored and not yielded the benefits of economic growth through a global $500 million initiative, AdvancingCities
• Inaugurated the Advancing Black Pathways initiative to provide more personal and professional growth opportunities to black people
• Supported the summer youth employment programs (SYEPs) across 24 cities in the United States with a $20 million commitment.
• Committed to aligning key sectors of portfolio with the goals of Paris Agreement to create a sustainable future and address climate change by achieving net-zero emissions by 2050. 

Key Takeaway 3: Digital Transformation Can Give You An Edge To Win Market Share

Regardless of the industry, geographic region, business vertical, or target audience you cater to, digital transformation is essential for your business. Without it, you cannot survive let alone thrive.

JPMorgan Chase & Co. knew it and hence, gained a first-mover advantage in the digital space as it invested heavily and committed to transforming the business. 

The result? It leveraged emerging technologies such as cloud computing, machine learning, artificial intelligence, and blockchain among others to scale up.

Why is JP Morgan Chase & Co. So Successful?

JP Morgan Chase & Co. is a result of a number of mergers and acquisitions over the decade. From being the pioneer of television banking to ushering in the era of online banking, JP Morgan Chase has a long history.

JP Morgan Chase & Co. is the oldest, largest, and one of the most renowned financial companies in the world. With its history tracing back to 1799 and a network of organizations in over sixty countries worldwide, JP Morgan Chase & Co.’s influence spreads far and wide.

What Are The Core Business Principles of JP Morgan Chase & Co.?

Here are JP Morgan Chase & Co.'s three core principles:

• Delivering exceptional client service
• Acting with integrity and responsibility
• Sporting the growth of employees

What Is The Mission of JP Morgan Chase & Co.?

JP Morgan Chase & Co. aims to ensure inclusive, sustainable growth and become the most respected financial services company in the world and the foremost choice of individuals, corporations, and governments worldwide.

Who Owns JP Morgan Chase & Co.?

JP Morgan Chase & Co. is owned by:

• Institutional investors such as BlackRock, The Vanguard Group, State Street, Fidelity Investment, and Capital Research & Management among others. Collectively, they own up to 76% of JP Morgan Chase & Co’s common stock.
• General public a.k.a individual investors. Collectively, they own up to 23 percent of JP Morgan Chase & Co’s common stock.
• Company insiders and board executives, including James Crown, Jamie Dimon, and Daniel Pinto. Collectively, they own up to 0.6 percent of JP Morgan Chase & Co’s common stock.

JP Morgan Chase & Co.’s Growth By Numbers

JP Morgan Chase & Co. is among the list of world’s select-few companies that need no introduction and are recognized globally. With illustrious dating back to 1799 and over 1200 predecessor organizations joining together to form JP Morgan Chase & Co., it doesn’t come as a surprise that the firm’s name is closely tied to innovations in finance and growth of the US as well as world economies.

Mergers and Acquisitions Examples: The largest company M&A deals list

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

This post was originally published in August 2019 and has been updated for relevancy in May 2, 2024.

When it comes to mergers and acquisitions, bigger doesn’t always mean better - the examples we included in our list of the biggest M&A failures is evidence of that.

In fact, all things being equal, the bigger a deal becomes, the bigger the likelihood that the buyer is overpaying for the target company. But whether you like mega deals or not, we cannot afford to ignore them. 

At DealRoom, we help companies evolve and streamline multiple large and successful M&A deals each year. In this article, we collected some of the biggest deals in history.

Related: 11 Biggest M&A Deals of 2022 and 8 Biggest Upcoming M&A Deals in 2023 (so far)

Biggest mergers and acquisitions examples list.

Reading this list, it can seem that the biggest deals are doomed to failure (at least from the perspective of their shareholders). But thankfully, that just isn’t the case. Some of the biggest M&A transactions of the past 30 years have been outstanding successes.

Many of these deals have achieved what they set out to do at the outset - to reshape industries on the strength of a single deal.

With that in mind, let's take a closer look at 25 companies that recorded the largest mergers and acquisitions in history.

1. Vodafone and Mannesmann (1999) - $202.8B

As of March 2024, the takeover of Mannesmann by Vodafone in 2000 was still one of the largest acquisitions ever made. Worth ~ $203 billion at that time, Vodafone, a mobile operator based in the United Kingdom, acquired Mannesmann, a German-owned industrial conglomerate company.

This deal made Vodafone the world’s largest mobile operator and set the scene for dozens of mega deals in the mobile telecommunications space in the years that followed. This deal is still considered as the biggest acquisition in history.

2. Shenhua Group and China Guodian Corporation (2017) - $278B ($354B adjusted for inflation)

The merger between Shenhua Group and China Guodian Corporation is the biggest example of a merger of equals that happened in 2017. Shenhua Group is China’s largest coal provider, while China Guodian Corporation is one of the top five electricity producers.

This $278 billion merger created the world’s largest power utility company by installed capacity. The goal of the merger was to create a balanced energy portfolio between coal power and renewable energy. This is to align with China’s broader environmental and economic objectives .

3. AOL and Time Warner (2000) - $182B ($325B adjusted for inflation)

When we mentioned at the outset of this article that ‘ big doesn’t always mean better ’, the famous merger of AOL, a U.S.-based internet service provider, and Time Warner, an American cable television company, in 2000 is a case in point. 

In little over two decades, the deal has become cemented as the textbook example of how not to conduct mergers and acquisitions. It featured everything from overpaying to strong cultural differences and even, with the benefit of hindsight, two large media companies who just weren’t sure where the media landscape was headed. 

The merger's valuation came crashing down after the dot-com bubble burst just two months after the deal was signed. The deal, which is to be known as the largest merger in history, fell apart in 2009, 9 years later after it was originally signed.

4. ChemChina and Sinochem (2018) - $245B ($309B adjusted for inflation)

The ChemChina and Sinochem merger was part of the Chinese government’s bigger plan to strengthen their competitiveness in the global stage by reducing the overall number of its state-owned enterprises through merging its biggest companies to create a larger firm.

This specific merger created the world’s largest industrial chemicals company, known as Sinochem Holdings, which surpassed major global competitors like BASF in North America in terms of scale and market presence.

5. Gaz de France and Suez (2007) - $182B ($259B adjusted for inflation)

France loves its national champions - the large French companies that compete on a world stage, waving the tricolor. It was no surprise then, when Nicholas Sarkozy, President of France in 2007, stepped in to save this merger.

That’s right - a President playing the role of part-time investment banker. These days, Suez is one of the oil and gas ‘majors’, although the fact that the company’s share price hovers very close to where it was a decade and a half ago tells us everything of what investors thought of the deal.

The deal, one of the biggest mergers ever in energy, created the world’s fourth largest energy company and Europe’s second largest electricity and gas group. The merged companies created a diversified, flexible energy supply stream with a high-performance electricity production base.

6. Glaxo Wellcome and SmithKline Beecham merger (2000) - $107B  ($197B adjusted for inflation)

The merger of the UK’s two largest pharmaceutical firms in 2000 led to what is currently the 6th largest pharmaceutical firm in the world, and the only British firm in the top 10.

However, like several deals on this list, it wasn’t received particularly well by investors and at the time of writing is trading at about 25% less than the time of the merger.

This, and a range of bolt-on acquisitions in the consumer space over the past decade, may explain why the company is planning to split into two separate companies in the coming years.

7. Verizon and Vodafone (2013) - $130B ($173B adjusted for inflation)

Vodafone has been involved in so many transactions over the past 20 years that they should be getting quite efficient at the process at this stage. The $130B deal in 2013 allowed Verizon to pay for its US wireless division.

At the time, the deal was the third largest in history - two of which Vodafone had partaken in. From Verizon’s perspective, it gave the company full control over its wireless division, ending an often fraught relationship with Vodafone that lasted for over a decade, and also allowed it to build new mobile networks and contend with an increasingly competitive landscape at the time.

From Vodafone's point of view, the acquisition cut the company value roughly in half, to $100 billion. The business acquisition also moved Vodafone from the second largest phone company in the world down to fourth, behind China Mobile, AT&T, and Verizon.

8. Dow Chemical and DuPont merger (2015) - $130B ($166B adjusted for inflation)

When Dow Chemical and DuPont announced they were merging in 2015, everyone sat up and took notice; the merger of equals would create the largest chemicals company by sales in the world, as well as eliminate the competition between them, making it a picture-perfect example of horizontal merger.

Shortly after the deal was completed, in 2018, the company was already generating revenue of $86B a year - but it didn’t last long: In 2019, management announced that the merged company would spin off into three separate companies, each with a separate focus.

9. United Technologies and Raytheon (2019) - $121B ($147B adjusted for inflation)

The merger between United Technologies Corporation (UTC) and Raytheon Company created Raytheon Technologies, an aerospace and defense giant. The new legal entity is expected to be the leader in aerospace and defense industries, with a broadened portfolio and enhanced market reach.

Now that the deal went through, Raytheon can leverage United Technologies' expertise in high temperature materials for jet engines; and in directed energy weapons, United Technologies has relevant power generation and management technology.

So far, however, investors seem less convinced with the company’s share price taking a dip of around 25% straight after the deal closed.

10. AB InBev and SABMiller merger (2015) - $107B  ($138B adjusted for inflation)

If stock price is any indication of whether a deal was successful or not, then the creation of AmBev through the merger of InBev and SABMiller in 2015 certainly wasn’t.

On paper, the deal looked good - two of the world’s biggest brewers bringing a host of the world’s favorite beers into one stable.

There was just one problem - they didn’t foresee the rise of craft beers and how it would disrupt the brewing industry. Several bolt-on acquisitions of craft brewers later and the new company may finally be on track again.

11. AT&T and Time Warner (2018) - $108B ($134B adjusted for inflation)

Not only did the proposed merger of AT&T and Time Warner draw criticism from antitrust regulators when it was announced, it also brought back memories of the previous time Time Warner had been involved in a megadeal.

With the best part of two decades to learn from its mistake, and AT&T a much bigger cash generator than AOL, this deal looks like it has been better thought through than the deal that preceded it.

12. Heinz and Kraft merger (2015) - $100B  ($131B adjusted for inflation)

The merger of Heinz and Kraft - to create the Kraft Heinz Company - is yet another megadeal that has a detrimental effect on stock.

The deal has been called a “ mega-mess ,” with billions knocked off the stock price since the deal closed. One of the reasons has been allegations made about accounting practices at the two firms before the merger.

Another reason has been zero-based budgeting (ZBB), a strict cost cutting regime that came at a time when old brands needed to be refreshed rather than have their budgets cut back.

13. BMO Financial Group and Bank of the West (2021) - $105B ($119.5B adjusted for inflation)

On December 20, 2021, BMO Financial Group announced the acquisition of BNP Paribas SA unit Bank of the West and its subsidiaries with assets worth approximately $105B. This merger is expected to significantly expand BMO’s presence in the U.S.

Through this acquisition, BMO can expand their customer base, increase their market presence in new regions, and enhance their existing capabilities with complementary products and services offered by Bank of the West.

14. Bristol-Myers Squibb and Celgene merger (2019) - $95B  ($115B adjusted for inflation)

Despite the massive size of the transaction, this 2019 megadeal wasn’t a “merger of equals.” Instead, Celgene became a subsidiary of Bristol-Myers Squibb. The deal brings together two of the world’s largest cancer drug manufacturers, so hopefully the deal amounts to something much greater than the sum of the parts.

15. Energy Transfer Equity and Energy Transfer Partners (2018) - $90B  ($111B adjusted for inflation)

This deal is part of a strategic initiative to simplify Energy Transfer Equity’s corporate structure and streamlining their operations.​

Each ETP unit was converted into 1.28 ETE units, resulting in a major redistribution of shares but keeping the business essentially continuous under a new name. 

ETE was renamed Energy Transfer LP and began trading under the ticker symbol "ET" on the New York Stock Exchange. On the other hand, ETP was renamed Energy Transfer Operating L.P.

16. Unilever plc and Unilever N.V. (2020) - $81B  ($97B adjusted for inflation)

The M&A deal between Unilever plc and Unilever N.V. in 2020 was essentially a unification strategy. The primary goal was to create a more cohesive organization with streamlined operations and increased strategic flexibility. 

During this process, they made sure nothing will change in their operations, locations, activities or staffing levels in either The Netherlands or the United Kingdom.

17. Walt Disney and 21st Century Fox (2017) - $52.4B ($83.7B adjusted for inflation)

In December 2017, The Walt Disney Company acquired 21st Century Fox. Walt Disney’s goal was to boost their global presence and content diversity, adding to its strong franchise and streaming service portfolio. This acquisition enhanced Disney’s entertainment library and direct-to-consumer streaming offerings, bringing franchises like X-Men and Deadpool under one roof.

18. Bayer and Monsanto (2018) - $63B ($78B adjusted for inflation)

The deal between Bayer and Monsanto worth approximately $63B created one of the world's biggest agrochemical and agricultural biotechnology corporations. Bayer was known widely for its pharmaceutical division, but it also has a substantial crop science division, where they offer chemical and crop protection. 

Through the Monsanto acquisition, Bayer has strengthened their agricultural business using Monsanto’s expertise, which ultimately made them a global leader in seeds, traits, and agricultural chemicals.

After the completion of the deal in 2018, the integration has been complex due to the legacy issues inherited from the acquisition of Monsanto, such as culture, reputation, and legal and regulatory issues.

19. Microsoft and Activision Blizzard (2023) - $75.4B ($76.5B adjusted for inflation)

On January 18, 2022, Microsoft announced its intent to acquire Activision Blizzard, initially valued at $68.7B. The goal of this strategic acquisition was to significantly boost its gaming segment across various platforms including mobile, PC, console, and cloud. 

Microsoft can do this by integrating Activision Blizzard's strong portfolio of popular gaming franchises like Call of Duty, World of Warcraft, and Candy Crush. After overcoming numerous regulatory challenges, the deal was finalized on October 13, 2023. 

This acquisition, with the total cost amounting to $75.4 billion, represents one of the largest deals in the video game industry.

20. Broadcom and VMWare (2023) - $61B ($62B adjusted for inflation)

In November 2023, Broadcom acquired VMWare to strengthen its infrastructure software business by integrating VMWare’s extensive multi-cloud services capabilities. 

Due to the large scale of both companies’ operations, the deal had to go through a massive regulatory scrutiny and review. It involved multiple jurisdictions across the globe to assess its impact on competition and market dynamics within the tech industry.

21. Exxon Mobil and Pioneer Natural Resources (2023) - $59.5B ($60B adjusted for inflation)

As part of their strategy to enhance their production capabilities and market presence in the oil and gas industry, Exxon Mobil merged with Pioneer Natural Resources. 

They announced this deal in October 2023, with the goal to achieve a partnership that would combine their strengths in terms of resources and strengthen their portfolio in the global energy market. 

ExxonMobil’s Senior Vice President, Niel Chapman, reaffirms that the deal is still on track and is set to close in the second quarter of 2024.

22. S&P Global and IHS Markit (2020) - $44B ($52.8B adjusted for inflation)

S&P Global announced an all-stock merger with IHS Markit worth $44 billion in November 2020. Through this deal, S&P Global will gain access to a data provider that supplies financial information to 50,000 customers across business and governments. Both companies expected a generated annual free cash flow of exceeding $5bn by 2023.

23. Discovery, Inc. and WarnerMedia (2022) - $43B ($46B adjusted for inflation)

On April 8, 2022, Discovery Inc. and WarnerMedia finalized a merger that would enhance their global media and entertainment footprint. The goal was to combine Warnermedia’s extensive entertainment assets with Discovery's non-fiction and international entertainment.

This $43B deal formed a new entity called Warner Bros. Discovery, which now has a vast portfolio that includes networks such as CNN, HBO, and Discovery Channel, as well as streaming services like HBO Max and Discovery+.

This horizontal merger boosted the newly formed company to compete with other major players like Netflix and Disney+ by providing a richer diversity of content across genres.

24. Pfizer and Seagen (2023) - $43B ($43.7B adjusted for inflation)

Pfizer’s acquisition of Seagen for $43B in March 2023 marked one of the largest deals in the biopharmaceutical sector since 2019.

Since Seagen is a biotech company known for its expertise in developing antibody-drug conjugates (ADCs) and other innovative cancer therapies, this acquisition will strengthen Pfizer’s oncology portfolio and expand their presence in the cancer treatment market.

25. Altimeter and Grab Holdings (2021) - $40B ($46.7B adjusted for inflation)

Altimeter’s stock-for-stock merger with Grab Holdings marked as the largest de-SPAC transaction at that time, worth approximately $40B. 

Instead of a traditional IPO process, Altimeter helped Grab go public through a reverse merger. The primary motive of the deal was to boost Grab's dominance in Southeast Asia by providing them with additional capital to propel their expansion and face their fierce competition, particularly Gojek.

It's a win-win move for Altimeter because the merger carved an opportunity for them to invest in a fast-growing tech company with a solid market presence in a rapidly developing region.

Merger examples

A merger is a transaction of two companies, usually of similar size, mutually agreeing to combine their businesses into one entity. 

This is distinct from an acquisition , where one company (the buyer) buys the outstanding shares of a target company, and the target company’s shareholders receive the proceeds from selling those shares.

Here are a few examples of mergers that have happened in the M&A landscape:

Exxon Mobil and Pioneer Natural Resources (2023) - $59.5B ($60B adjusted for inflation)

This is a great example of a merger of equals where no payment was made from one company to another. This was an all-stock transaction, where Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing.

United Technologies and Raytheon (2019) - $121B ($147B adjusted for inflation)

Another classic example of a so-called “ merger of equals .” The United Technologies and Raytheon merger is also an all-stock transaction, where Raytheon shareholders receive shares in the new company, while UTC shareholders maintain a majority stake.

Discovery, Inc. and WarnerMedia (2022) - $43B ($46B adjusted for inflation)

Despite the first two examples mentioned above, not all mergers involve two equal-sized companies. When AT&T owned WarnerMedia, they merged it with a smaller company, Discovery Inc. This special kind of deal is called a Reverse Morris Trust. So even though it's a merger, AT&T got $40.4 billion in cash as a payment. 

This payment was part of the deal to help balance things out between what AT&T was giving up and what they were getting in return. AT&T shareholders also ended up owning a big part of the combined company.

Acquisition example

An acquisition is a transaction whereby companies, organizations, and/or their assets are acquired for some consideration by another company. The motive for one company to acquire another is nearly always growth. 

In the next section, let’s take a look at great acquisitions examples that have happened in M&A history.

Microsoft and Activision Blizzard (2022) - $75.4B ($76.5B adjusted for inflation)

This is an example of an outright acquisition. In December 2021, Blizzard faced allegations and a lawsuit regarding workplace misconduct, specifically discrimination against women employees. Their reputation and business operations were taking a hit, and they wanted an out. 

Meanwhile Microsoft wanted Activision's iconic franchises like “Call of Duty” and “World of Warcraft” to increase their presence in the gaming industry. Activision saw Microsoft’s acquisition as a way to address internal issues under new leadership, while Microsoft potentially expanding its footprint in the gaming industry.

Walt Disney and 21st Century Fox (2017) - $52.4B ($83.7B adjusted for inflation)

Another classic example of an acquisition is the Walt Disney and 21st Century Fox deal. During this time, the media landscape was rapidly changing and traditional media companies like 21st Century Fox were facing significant competition from new digital entrants like Netflix and Amazon. Fox wanted to sell their company to focus on their core strengths, primarily news and sports. 

On the other hand, Walt Disney had better content creation and distribution, which allowed them to benefit from this transaction.

Amazon and Whole Foods (2017) - $13.7B ($17B adjusted for inflation)

Though this deal did not make our top 25, it’s certainly a great example of a successful acquisition. Amazon bought Whole Foods in 2017 for approximately $13.7B to have greater control of their supply chain and broaden their reach into new markets. 

Before this deal, Amazon was more focused on e-commerce. This strategic move allowed them to expand into the brick-and-mortar grocery sector, through Whole Foods. Amazon was able to integrate its e-commerce capabilities with Whole Foods' physical store network and achieved economies of scale in several areas, especially in distribution and logistics.

Lessons from successful and failed mergers and acquisitions 

Whether it’s a success or failure, there are always lessons to be learned in the world of mergers & acquisitions. Here are some of the best lessons we want to emphasize and share.

Don’t overlook culture 

In the past, culture was one of the most underrated aspects of M&A. No one cared about it, and deal makers were only focused on the numbers and synergies. Today, practitioners are catching on, and they tend to focus more on culture during due diligence. But for those who are still not believers, you can always look up the Daimler Benz and Chrysler deal back on May 7, 1998. 

Daimler was aggressive during integration and Chrysler didn’t want to be told what to do. They didn’t get along and continued to run as separate operations. The entire deal was a disaster, which eventually led to Daimler Benz selling Chrysler to the Cerberus Capital Management firm.

Don’t take due diligence for granted

M&A teams must never take due diligence for granted and turn every possible stone. One mistake can cause massive headaches, and potentially destroy the acquiring company.  HP learned this the hard way when they acquired Autonomy back in 2011. The plan was to transform HP from a computer and printer maker into a software-focused enterprise services firm. 

The problem came after the deal was closed, and HP discovered that Autonomy was cooking the books by selling hardware at a loss to its customers while booking the sales as software licensing revenue. This is one of the most controversial deals of all time, generating massive lawsuits due to fraudulent accounting practices.

Plan for integration early in the process

The biggest mistake any practitioner could make is not planning for integration early in the M&A process . Integration is where value is created, and must be prioritized during due diligence. 

The Sprint and Nextel Communications deal back in 2005 is a great example of the importance of integration planning. The combination of these two legal entities created the third largest telecommunications provider at that time. The goal is to gain access to each other's customer bases and cross sell their product lines. 

However due to the lack of integration planning during the diligence they were not prepared for what was about to come after closing. Apparently the two companies' networks did not share the same technology and had zero overlap making integration extremely difficult. They also lost a significant amount of market share due to their clashing marketing strategies that allowed rivals to steal dissatisfied customers.

Final thoughts

Overall, it’s hard to argue which deal in US history is the most successful merger or acquisition due to the fact that sometimes the full value and potential of a deal takes years to formulate.

However, the top mergers and acquisitions take into account best practices such as robust communication, focus on the strategic goal/deal thesis, and early integration planning throughout the deal lifecycle.

Much can be learned from companies that have successfully merged with or acquired other companies.

The right technology and tools can also work to make deals more successful. DealRoom’s M&A project management software and tools aims to help teams manage their complex M&A transactions.

Whether teams need deal management software, due diligence process assistance, help with their post merger (PMI) process, or just a simple VDR, our platform provides the necessary technology and features to streamline M&A processes.

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Mergers and acquisitions case studies and interviews | a guide for future lawyers.

Jaysen Sutton -

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 mergers and acquisitions case studies and interviews, a guide for future lawyers.

Enjoyed this post? Check out our new Mergers and Acquisitions Course , which covers exactly what you need to know about M&A for interviews at top commercial law firms. Free access to this course is given to all premium subscribers .

If you don’t know what commercial law is or what commercial lawyers do, it’s hard to know whether you want to be one.

I’m going to discuss one aspect of commercial law: mergers and acquisitions or “M&A”, and with any luck, convince you it can be exciting.

I’ll also cover many of the aspects of mergers and acquisitions that you need to know for law firm interviews and case study exercises.

Let’s begin with an example, which highlights the impact of mergers and acquisitions. In 2017, Amazon bought Whole Foods and became the fifth largest grocer in the US by market share. This single manoeuvre shed almost $40 billion in market value from companies in the US and Europe .

The fall in value of rival supermarkets reflected fears over Amazon’s financial capacity and its potential to win a price war between supermarkets. Amazon the customer data to understand where, when and why people buy groceries, and it has the technology to integrate its offline and online platforms. When you’re in the race to be the first trillion-dollar company, acquisitions can take you a long way ( Edit: In August 2018, Apple managed to beat Amazon to win this title ).

But not all companies share Amazon’s success. In fact, out of 2,500 M&A deals analysed by the Harvard Business Review, 60% destroyed shareholder value .

That begs the question:

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Why do firms merge or acquire in the first place?

I’ll use law firms as an example. You’ll have seen that they often merge, or adopt structures called Swiss vereins, which allow law firms to share branding and marketing but keep their finances and legal liabilities separate.

In the legal world, it can be hard to find organic growth or organic growth can be very slow. Clients like to shop around, which can make it hard to retain existing business. It’s competitive: other law firms can poach valuable partners and bring their clients with them. And whilst entering new markets is an attractive option, it’s expensive, often subject to heavy-regulation and requires the resolve and means to challenge the existing players in that market.

Consolidation can help law firms, which are squeezed between lower-cost entrants and the global players, to compete. This is why we’ve seen many mergers in the mid-market. A combined firm is bigger, less vulnerable to external shocks, and has access to more lawyers and clients. The three-way merger between Olswang, Nabarro and CMS is a good example of this. The year before its merger, Olswang had revenues below £100m and a 77% fall in operating profit. Now, under the name CMS, it’s one of the largest UK law firms by lawyer headcount and revenue.

But mergers aren’t only a defensive move. They can allow law firms to speed-up entry into new markets. For example, were it not for its merger, it would have been difficult for Dentons to open an office in China. Chinese clients, especially state-owned enterprises, are often less likely to pay high legal fees, while local expertise and personal relationships can play a bigger role. There’s also regulation, which prevents non-Chinese lawyers from practicing Chinese mainland law, and plenty of competition from established Chinese law firms. That helps to explain Dentons’ 2015 merger with Dacheng, a firm with decades of experience and an established presence in the Chinese market. Now Dentons is positioned to serve clients investing in China, as well as Chinese clients looking for outbound work at a fraction of the time and cost.

Mergers can also synergies, or at least that’s one of the most frequently used buzzwords to justify an M&A deal. The idea is that when you combine two firms together, the value of the combined firm is more than the sum of its individual parts.

Synergies for a law firm merger could come from cutting costs by closing duplicate offices and laying off support staff. It could also be the fact that a combined law firm could sell more legal services than the two law firms individually, which may be bolstered by the fact that they can cross-sell their expertise to each other’s clients and benefit from economies of scale (e.g. better negotiating paper due to their size).

Finally, mergers can offer reputational benefits. Branding is an essential part of the legal world and combinations gain a lot of legal press. Mergers may allow fairly unknown firms to access new clients and generate far more business if they partner with an established firm. Very large global firms often pride themselves as a ‘one-stop shop’, pitching the fact that their size allows them to service all the needs of a client across any jurisdiction.

While it’s true that Swiss vereins have led the likes of DLA Piper and Baker McKenzie to develop very strong brands, collaboration hasn’t always worked out and some law firms have paid the ultimate price. Internal problems and mismanagement plagued the merger of Dewey & LeBoeuf , which, at the time, was called the largest law firm collapse in US history. Bingham McCutchen collapsed for similar reasons. Most recently, King & Wood Mallesons made the mistake of merging with an already troubled SJ Berwin. Poor incentive structures, defections and a fragile merger structure later led to the collapse of KWM Europe. Only time will tell whether Dentons’ 31 plus combinations, as well as the aggressive use of Swiss vereins by other firms, will be a success.

So that’s the why, I’ll now go through the how. Note, in this article, I’ll discuss the mechanics of acquisitions rather than mergers: you can see the difference in the definitions section below. As lawyers, you’ll find acquisitions are more common and you’re more likely to be asked about the acquisition process in law firm interviews and assessment centres.

Mergers & Acquisitions Definitions

• Acquisition : The purchase of one company by another company.
• Acquirer / Buyer : The company purchasing the target company.
• Asset purchase : The purchase of particular assets and liabilities in a target company. An alternative to a share purchase.
• Auction sale : The process where a company is put up for auction and multiple buyers bid to buy a target company.
• Due diligence : The process of investigating a business to determine whether it’s worth buying and on what terms it should be bought.
• Debt finance : This means raising finance through borrowing money.
• Equity finance : This means raising finance by issuing shares.
• Mergers : When two companies combine to form a new company.
• Share purchase : When a company buys another company through the purchase of its shares. An alternative to an asset purchase.
• Swiss verein : In the law firm context, this is a structure used by some law firms to ‘merge’ with other law firms. They share marketing and branding, but remain legally and financially separate.
• Target company : The company that is being acquired.

Kicking off the Acquisition Process

The buy side.

Sometimes the acquirer will have identified a company it wants to buy before it reaches out to advisers. Other times, it’ll work closely with an investment bank or a financial adviser to find a suitable target company.

Before making contact with the target company, the acquirer will typically undertake preliminary research, often with the help of third-party services to compile reports on companies. They’ll look through a range of material including:

• news sources and press releases
• insolvency and litigation databases
• filings at Companies House
• the industry and competitors

The aim is to better understand the target company. The company’s management will want to check for any big risks and form an early view of the viability of an acquisition. Then, if they’re convinced, the first contact may be direct or arranged through a third party, such as an investment bank or consultant.

Note: In practice, lawyers – especially trainees – spend a lot of time using the sources above. Companies House is a useful online resource to find out about private companies. It’s where you’ll find their annual accounts, annual returns (now called a confirmation statement) and information on the company’s incorporation.

The sell side

Sometimes, a target company wants to sell. The founders may want to retire, the company may be performing poorly, or investors may want to cash out and move on.

If a target company wants more options, it may initiate an auction sale. This is a competitive bid process, which tends to drive bid prices up and help the target company sell on the best terms possible. For example, Unilever sold its recent spreads business to KKR using this method.

But, an auction sale isn’t always appropriate. Sometimes the target company will enter discussions with just one company. This may be preferable if the company is struggling, so it can ensure speed and privacy, or the target company may have a particular acquirer in mind. For example, Whole Foods used a consultant to arrange a meeting with Amazon . That was after reading a media report which suggested Amazon was interested in buying the company.

Friendly v Hostile Takeovers

In the UK, takeovers are often used to refer to public companies. While we’ll be focusing on acquisitions of private companies, I’ll cover this here because they’re often in the news and sometimes come up in law firm interviews.

The board of directors are the people that oversee a company’s strategy. Directors owe duties to shareholders –  the owners of the company – and are appointed by the shareholders to manage a company’s affairs.

If a proposed acquisition is brought to the attention of the board and the board recommends the bid to shareholders, we call this a friendly takeover. But if they don’t, it’s a hostile takeover, and the acquirer will try to buy the company without the cooperation of management. This may mean presenting the offer directly to shareholders and trying to get a majority to agree to sell their shares.

Sometimes, it’s not too difficult; Cadbury’s board first rejected Kraft’s bid and accused the company of attempting to buy Cadbury “on the cheap”. Later, when Kraft revised its offer, the board recommended its bid to shareholders.

In other situations, hostile takeovers can be messy, especially if neither party wants to back down. This was the case in 2011 between the infamous activist investor Carl Icahn and The Clorox Company.

Icahn and the Clorox Company

In 2011, Carl Icahn made a bid to buy The Clorox Company (Clorox), the owner of many consumer products including Burt’s Bees. In his letter to the board, Icahn also tried to start a bidding war, inviting other buyers to step in and bid.

Clorox’s board rejected Icahn’s bid and quickly hired Wachtell, Lipton, Rosen & Katz, a US law firm, to defend itself. Wachtell wasn’t just any law firm. Icahn and Wachtell had been rivals for decades. In fact, between 2008 and 2011, Wachtell had successfully defended two companies from Icahn.

This was round three.

Clorox adopted a “poison pill” strategy, a tactic that allowed Clorox’s existing shareholders to buy the company’s shares at a discount. This made the attempted takeover more expensive. Martin Lipton, one of the founding partners of Wachtell, had invented the poison pill to prevent hostile takeovers in the 80’s. It was “one of the most anti-shareholder provisions ever devised” according to Icahn. Now, Clorox was using this weapon to stop the activist investor.

But that didn’t stop Icahn. In a scathing letter to the board , he raised his bid for the company.  A week later, the board rejected it again.

Icahn made a third bid. This time his letter threatened to remove the entire board. But the board didn’t back down.

Eventually, Icahn did.

The war between Icahn and Wachtell didn’t stop there. In 2013, Wachtell successfully defended Dell from Icahn. A few months after that, Icahn tried to sue Wachtell. In response, the law firm said:

“ Icahn takes his bullying campaign to a new level, seeking to intimidate lawyers who help clients resist his demands by making wild allegations and threatening liability. Those tactics will not work here .”

Remember when I said corporate law could be exciting?

What are the ways a company can acquire another company?

This is one of the most common questions in law firm commercial interviews.

There are two ways to acquire a company. A company can buy the shares of a target company in a share purchase or buy particular assets (and liabilities) in an asset purchase.

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Share Purchase

In a share purchase, the acquirer buys a majority of shares in the target company and therefore becomes its new owner . This means all of the company’s assets and liabilities transfer automatically, so, usually, there’s no need to worry about securing consent from third parties or transferring contracts separately. This is great because the business can continue without disruption and the transition is fairly seamless.

However, as the liabilities of a company also transfer in share purchase, it’s important the acquirer investigates the target really well. It’ll also want to try protect itself from known risks when negotiating the acquisition agreement.

For example, suppose three months after the acquisition has completed, a former employee brings an unfair dismissal claim against the acquirer. If this was something they had known about pre-acquisition, they’ll want to be indemnified for those costs (we’ll come back to this later).

Conversely, if they didn’t know about it at the time of the acquisition and they didn’t protect themselves in the acquisition agreement, they’ll have to pay out. That’s one of the risks of doing a share purchase. (Although as we’ll discuss later, there are certain things you can do to reduce the risks of this happening.)

Asset Purchase

We call this an asset purchase . It means that the acquirer identifies the specific assets and liabilities it wants to buy from the target and leaves everything else behind. That’s great because the acquirer will know exactly what it’s getting and there’s little risk of hidden liabilities.

However, asset purchases are less common and can be difficult to execute. Unlike share purchases, assets don’t transfer automatically, so the acquirer may have to renegotiate contracts or seek consent from third parties to proceed with the acquisition.

Preliminary Agreements

Confidentiality agreements.

Before negotiations begin, the target company will want the acquirer to sign a confidentiality agreement or a non-disclosure agreement.

This is important because the seller will provide the acquirer with access to private information during the due diligence process. Suppose the acquirer decided not to proceed with the acquisition and there was no confidentiality agreement in place; the acquirer could use this information to poach staff, better compete with the target or reveal damaging information to the public.

So, lawyers for the acquirer and the target company will negotiate the confidentiality agreement. They’ll decide what counts as confidential, what happens to information if the acquisition doesn’t complete, as well as any instances where confidential information can be passed on without breaching the contract.

Exclusivity Agreements

If an acquirer is dead set on buying a particular target company then, in an ideal situation, it will want to be the only one negotiating with that company. This would give the acquirer time to conduct due diligence and negotiate on price, without pressure from competitors. It also ensures secrecy.

If the acquirer has some bargaining power, it may try to sign an exclusivity agreement with the target company. This would ensure, for a period of time, the target company does not discuss the acquisition with third parties or seek out other offers.

While it’s unclear whether an exclusivity agreement was actually signed, Amazon was clear during early negotiations with Whole Foods that it wasn’t interested in a “multiparty sale process ” and warned it would walk if rumours started circulating. That was effective: Whole Foods chose not to entertain the four private equity firms who’d expressed interest in buying the company.

Heads of Terms

The first serious step will be the negotiation of the Heads of Terms (also called the Letter of Intent) between the lawyers, on behalf of the parties. This document details the main commercial and legal terms that have been agreed between the parties, including the structure of the deal, the price, the conditions for signing and the date of completion. It’s not legally binding – so the acquirer won’t have to buy and the target company won’t have to sell if the deal doesn’t go through – but it serves as a record of early negotiations and a guideline for the main acquisition document.

Due Diligence

An acquirer can’t determine whether it should buy a target without detailed information about its legal, financial and commercial position. The process of investigating, verifying and reviewing this information is called due diligence.

The due diligence process helps the acquirer to value the target. It’s an attempt at better understanding the target company, quantifying synergies and determining whether an acquisition makes financial sense.

Due diligence also reveals the risks of an acquisition. The acquirer can examine potential liabilities, from customer complaints to litigation claims or scandals. This is important because underlying the process of due diligence is the principle of  caveat emptor , which means “let the buyer beware”. This legal principle means it’s up to the buyer to fully investigate the company before entering into an agreement. In other words, if the buyer failed to discover something during due diligence, it’s their problem. There’s no remedy after the acquisition agreement is signed.

So if the problems uncovered during the due diligence process are substantial, the acquirer may decide to walk away. Alternatively, it could use this information to negotiate down the price or include terms to protect itself in the main acquisition document.

In an asset purchase, due diligence is also an opportunity to identify all the consents and approvals the buyer needs to acquire the company.

Due Diligence Teams

The acquirer will assemble a team of advisers, including bankers, accountants and lawyers, to manage the due diligence process. The form and scope of the review will depend on the nature of the acquisition. For example, an experienced private equity firm is likely to need less guidance than a start-up’s first acquisition. Likewise, a full due diligence process may not be appropriate for a struggling company that needs to be sold quickly.

Due diligence isn’t cheap, but missing information can be devastating. In a Merger Market  survey , 88% of respondents said insufficient due diligence was the most common reason M&A deals failed. HP had to write off $8.8 billion after its acquisition of Autonomy – which was criticised for being a result of HP’s ‘ faulty due  diligence ‘. Few also looked into organisational compatibility in the merger between AOL and Time Warner, which led to the “ biggest mistake in corporate history ”, according to Jeff Bewkes, chief executive of Time Warner. In 2000, Time Warner had a market value of $160 billion. In 2009, it was worth $36 billion.

Types of Due Diligence

Financial due diligence  This involves assessing the target company’s finances to determine its health and future performance.

Business due diligence  This involves evaluating strategic and commercial issues, including the market, competitors, customers and the target company’s strategy.

Legal Due Diligence

Legal due diligence is the process of assessing the legal risks of an acquisition. By understanding the legal risks of an acquisition, the acquirer can determine whether to proceed and on what terms.

The acquirer’s lawyers have a few ways of obtaining information for their due diligence report. They’ll prepare a questionnaire for the seller to complete and request a variety of documents. This will all be stored in a virtual ‘data room’ for all parties to access. They may also undertake company, insolvency, intellectual property and property searches, interview management and, if appropriate, undertake on-site visits.

Law firms tend to have a system to manage the flow of information and trainees are often very involved. They’ll review, under supervision, much of the documentation and flag up potential risks.

Legal due diligence reports are typically on an ‘exceptions’ basis. This means they’ll flag to the client only the material issues. You can see why this is valuable to the client; rather than raising every possible issue, they’ll apply their commercial judgement to inform the clients about the most important issues.

The report will propose recommendations on how to handle each identified issue. This may include: reducing the price, including a term in the agreement or seeking requests for more information. If the issue is significant, lawyers will want to tell their client immediately, especially if what they find is very serious.

Note, due diligence is a popular topic for interviews. You may be asked to recommend possible solutions to issues uncovered during the due diligence process or asked to discuss the issues that different departments may consider (see examples below).

What are lawyers looking for during due diligence?

What might corporate investigate.

The group structure of the target, including the operations of any parent companies or subsidiaries

The company’s constitution, board resolutions, director appointments and resignations, and shareholder agreements.

Important details from Insolvency and Companies House searches

Copies of contracts for suppliers, distributors, licences, agencies and customers.

Termination or notification provisions in contracts

What do they want to know?

Whether shareholders can transfer their shares (share purchase)

Whether shareholders need to approve the sale and the various voting powers of shareholders

Any change of control provisions in contracts

Whether the target can transfer assets (asset purchase)

Any outstanding director loans, director disqualifications, or conflicts of interest

What might Finance investigate?

Existing borrowing arrangements including loan documents and any guarantees

Correspondence with lenders and creditors

Share capital, allocation and employee share schemes

Assets and financial accounts

The company’s ability to pay current and future debts

Any prior loan defaults, credit issues or court judgements

Details of ownership and title to the assets

Any liabilities which could limit the performance of the target

Whether borrowing would breach existing loan terms

Whether the loan agreements have any change of control clauses

Whether security has been granted over the target’s assets to lenders

What might Litigation investigate?

Details of any past, current or pending litigation

Disputes between the company, employees or directors

Regulatory and compliance certificates

Any judgements made against the company

Insurance policies

The risk of outstanding or future claims against the company

Details of any regulatory or compliance investigations

Potential issues or threatened litigation from customers, employees or suppliers in the past five years

What might Property investigate?

Documents relating to freehold and leasehold interests

Inspections, site visits, surveyors and search reports

Health and safety certificates and building regulation compliance

Leases and licences granted to third parties

Whether the property will be used or sold

Property liabilities

Title ownership and lease/licensing terms

The value of the properties

Details of regulatory compliance

What might Employment investigate?

Director and employee details, and service contracts

Pension schemes and employee share schemes

Pay, benefits and HR policy information

Information in relation to redundancies, dismissals or litigation

Plans to retain key managers, redundancy and compensation

Pension scheme deficits

Termination or change of control provisions

Compliance with employment law and consultation

Risks of dismissal claims

Evaluate post-acquisition integration

What might Intellectual Property investigate?

List of any trademarks, copyright, patents, domain names and any other registered intellectual property

Registration documents and licencing agreements

Litigation and related correspondence

Searches at the Intellectual Property Office

Current or potential disputes, claims of threatened litigation in relation to infringement

Whether the seller has renewed trademarks

Who has ownership of the intellectual property

Whether they can transfer licenses and gain consents

Details of critical assets, confidentiality provisions and trade secrets

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The Acquisition Agreement

The main legal document is the sale and purchase agreement or “SPA”. It sets out what the acquirer is buying, the purchase price and the key terms of the transaction.

Purchase Price

A company will usually pay for an acquisition in cash, shares, or a combination of the two.

Cash is a good option if an acquirer is confident in the acquisition. If it believes the shares are going to increase in value (thanks to synergies), paying in cash means it can soak up the benefits without having to give up ownership of the company. It is, however, expensive to pay in cash. The buyer must raise money if it doesn’t already have enough cash reserves by issuing shares or borrowing.  Most sellers also want cash. It means they’ll know exactly how much they’re getting and don’t have to worry about the future performance of a company.

Other times, an acquirer will want to use shares to pay for an acquisition. The target’s shareholders will get a stake in the acquirer in return for selling their shares. If the value of the acquirer’s shares increases, the shareholders may get a better return. Often, this option will be more attractive for an acquirer as it doesn’t use up cash. Receiving shares can also be valuable for the seller if they’re gaining shares in a promising company. Conversely, however, they must bear the risk that the value of the acquirer falls.

Key terms of the transaction

Both parties will make assurances to each other in the form of terms in the SPA. These terms are heavily negotiated between lawyers.

Warranties and representations

Warranties are statements of fact about the state of the target company or particular assets or liabilities. For example, the seller may warrant that the target isn’t involved in any litigation, that its accounts are up to date and that there are no issues with its properties. If these warranties turn out to be false, the acquirer may claim for damages. However, there are limitations: the acquirer will have to show that the breach reduced the value of the business and that can be hard to prove.

During negotiations, the seller will try to limit the scope of the warranties. It’ll also prepare a disclosure letter to qualify each warranty. For example, the seller may qualify the above warranty with a list of outstanding litigation claims. If the seller discloses against a warranty, they won’t be liable for a breach. Disclosure is also useful for the acquirer because it may reveal information that was not found during due diligence.

The acquirer will want some of these statements to be representations. Representations are statements which induce the acquirer to enter into a contract. If these are false, the acquirer could have a claim for misrepresentation. That could give the acquirer a stronger remedy, including termination of the contract or a bigger claim for damages. This is why the seller will usually resist giving representations.

Indemnities

Indemnities are promises to compensate a party for identified costs or losses. This is appropriate because the acquirer may identify potential risks during due diligence; for example, the risk of an unfair dismissal claim or a litigation suit. The acquirer can seek indemnities to be compensated for these particular liabilities arising in the future. This is a way to allocate risks to the seller: if the event occurs the acquirer will be reimbursed by the seller.

Conditions Precedent

The SPA may be signed subject to the satisfaction of the conditions precedent or “CPs”. These are conditions that must be fulfilled before the acquisition can complete. That could mean, for example, securing consent from third parties, shareholder approval or merger clearance. Trainees are often responsible for keeping track of the conditions precedent checklist, and they’ll need to chase parties for the approvals to ensure all conditions are satisfied.[divider height=”30″ style=”default” line=”default” themecolor=”1″]

Signing and Completion

This is the big day. Signing can take place in person or virtually. Each party will return the SPA with their signature in accordance with the relevant guidelines. It’ll be the trainees responsibility to check that the SPA has been signed correctly and to collate the documents.

Final Thoughts

If you’re reading this to prepare for an interview, I’d suggest you explore the “acquisition structure”, “legal due diligence” and “warranties and indemnities” sections – these are common case-study questions. We cover this in more detail and with practice interview answers in our mergers and acquisitions course, which is free for TCLA Premium members.

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