10. IBM acquires PwC Consulting
In 2002, IBM acquired the consulting arm of Price-Waterhouse for US$3.5 billion. The move helped solidify IBM’s position in the consulting business and helped it move away from being a hardware and software manufacturer and more into the higher-margins consulting arena. The deal was very favorable to IBM in that it was able to acquire the company for less than 1 time revenue.
10.b PayPal acquired by Ebay
When Ebay acquired Paypal for US$1.5 billion, the move seemed to be a very risky one. Why would an auction house want to get an emerging payment system that really didn’t seem to fit much with its business model.
Ultimately, the deal has turned out to be quite a good bet as Paypal is now the engine of Ebay’s growth. In fact, most of the value of Ebay now resides in a payment system that has left many financial institution envious of its reach.
9. Lenovo acquires IBM’s computer division
In 2005, the company that had launched the personal computer revolution into the office changed hand as Lenovo, previously a local chinese computer manufacturer with no real global footprint, acquired IBM’s personal computer division for US$1.3 billion. The deal established Lenovo as a global player in the PC market and heralded the arrival of Chinese companies on the global scene.
8. Verizon acquires MCI
In the 1990s, MCI became one of the largest players in the telecommunication business, acquiring and rolling up small regional telephone companies and internet backbone operators. The problem, however, was that most of the growth it demonstrated on paper was based on fraudulent statements and accounting tricks that ended up with the company filing the largest bankruptcy on record at the time (this has since been superceded by other bankruptcies). Verizon acquired the company in 2005 for $US 6.7 billion, picking up one of the largest internet backbone operator in the process.
The deal, which had come on the heel of SBC’s acquisition of AT&T, was the last one in the landline telecom consolidation that left most of the country’s telephone and internet infrastructure under the control of either AT&T or Verizon.
7. Microsoft / Yahoo partner on Search
Sometimes, the importance of a deal has move to do with the disruptive effect it has on the parties involved than the successful outcome it may represent. Such is the case of the Microsoft/Yahoo partnership which came after years of discussions between the two companies. From 2005 to 2007, Microsoft attempted to quietly acquire Yahoo but the reluctance of Yahoo’s leadership at the time left those calls unanswered. In February 2008, Microsoft decided to take the discussion to a whole new level by making an unsolicited takeover bid of $US44.6 billion in cash and stock in early 2008. The goal was to combine the two companies into a combined one that could compete with Google. Over the next quarter, the two company would battle publicly, with Microsoft eventually giving up on its attempt.
For the next year and a half, Yahoo went through major upheavals due to its refusal to take Microsoft’s offer and the negative impact it ended up having on its market capitalization. With a new CEO installed, Yahoo then went on to agree to outsource its search business to Microsoft, taking it away from the business that had initially served as the foundation of the company. While the link-up has not been completed as of this writing, the disruption that all those negotiations created for the two companies allowed their chief rival, Google, to consolidate its hold on the markets that were at stake. As of this writing, the market share of search held by a combined Yahoo/Microsoft partnership has dropped substantially from where it was when the Microsoft bid was initially made.
6. Weblogs Inc. acquired by AOL
Weblogs Inc. was founded by Jason Calacanis (and Brian Alvey) as a network of blogs, including the popular engadget, which was run by Pete Rojas (also the founder of Gizmodo). When AOL bought the company, in 2005, the price was rumored to be around US$25 to US$30 million. At the time, some felt AOL had overpaid. Today, some feel Weblogs Inc. sold for too cheap.
The reason I would consider this deal significant is that it was the first major deal involving blogs (some would argue that Google’s acquisition of blogger fit the bill but my counter to that was that blogger was a blog tool company while weblogs inc. was a blog content company). Because AOL, an arm of Time-Warner at the time, was a large corporate entity, this acquisition legitimized blogging within the corporate world and made it easier for any subsequent blog-related deal to happen.
In the next entry, we will look at the top 5 on the list. Some of them may surprise you.
Update: Part 2 is up.