A McKinsey research says large acquisitions destroy value more often than not. That research recommends a programmatic acquisition which is regular, multiple small acquisitions meant to fill specific gaps in an organization's capabilities, offerings, or geographical presence. IBM has been a poster child of such a program in recent two decades.
When I read such pieces of research, most examples tend to be older, preceding the research. I wanted to start documenting more recent examples that offer some learning on value creation/destruction through inorganic pursuits. Perhaps more failures will get highlighted but I will try to find successes too. I will keep adding new examples as they come up to my notice. If you know any new examples, pls share with me. So, here we go:
HP Enterprises's divestment of its software portfolio:
When I read such pieces of research, most examples tend to be older, preceding the research. I wanted to start documenting more recent examples that offer some learning on value creation/destruction through inorganic pursuits. Perhaps more failures will get highlighted but I will try to find successes too. I will keep adding new examples as they come up to my notice. If you know any new examples, pls share with me. So, here we go:
HP Enterprises's divestment of its software portfolio:
- Acquisition: Britain's Autonomy Corp Plc in 2011 for $10.3 bn. Integrated into HP as a software business.
- Divestment: To Britain's Micro Focus International Plc on 8-Sep-2016 in a deal worth $8.8 bn ($2.5 bn cash and 50.1% equity in the combined company). Additional expense of $700 mn in one time costs related to the separation of the assets.
- There will also be some accumulated profits/losses for the duration of ownership which I haven't tried to find.
Intel's divestment of McAfee:
- Acquisition: McAfee (internet security software company) for $7.7 bn in 2011 and renamed as Intel Security Group in 2014
- Divestment: Sold 51% stake to investment firm TPG for $3.1 bn in cash on 8-Sep-2016. Brand name to be reverted to McAfee. TPG can leverage synergies with its other two investments in security start-up Tanium and Zscaler
- Intel's investment thesis:
- Integrate McAfee security technology into Intel chips but no progress made
- Get a piece of the emerging business of protecting corporations from sophisticated espionage, but newer players such as Mandiant, came to dominate the business
- Gain from market share increase in PC security but PC growth itself slowed
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