Merger Monday

Parul Arora - 3B Computer Engineering
Posted on: October 17, 2018

Mondays are not special for everyone, but the one a few weeks ago made headlines when announcements of two very distinct acquisitions were made in fashion and in music. While broadcasting company Sirius XM Holdings bought music streaming service Pandora for $3.5 billion dollars, fashion brand Michael Kors announced their acquisition of Italian fashion house Versace for $2.1 billion dollars – leaving fashion classicists clutching their overpriced pearls. The observance of many press releases regarding mergers and acquisitions (M&A) on Mondays, more than any other particular day of the week, led to the coining of the term “Merger Monday”. These merger announcements are fairly common in business as last minute preparations are typically finalised on the weekend, and stand to largely influence business news cycles for the upcoming week.

Companies often merge or acquire other companies in order to grow, diversify, or eliminate competition – taking anywhere from 3-6 months to several years in order to do so. 2018 has been an interesting year for M&A speculators: Adobe acquired Marketo for $4.75 billion, with intentions to combine the marketing software into Adobe’s Experience Cloud. Cisco acquired Duo Security, a cloud-based two-factor authentication company, for $2.35 billion in order to compete with Okta. Cloud software company Adaptive Insights, originally aiming for a $115 million dollar IPO, was instead bought for $1.55 billion by Workday in a lucrative, last-minute deal.

With an abundance of money and the intention to make shareholders happy, companies have spent excessive resources competing for ways to increase market share – justifiably warranting public criticism in the process. When Microsoft bought Github for $7.5 billion dollars, some wondered whether Clippy, the archaic paperclip cartoon, would provide recommendations on code-writing projects. When Amazon announced the acquisition of Whole Foods for $13.7 billion dollars activists raised their electronic pitchforks, demanding to know why employee wages were not supplemented instead. Facebook’s acquisition of Instagram broke the hearts of all the hipsters now forced to become mainstream – ultimately going to show that even though a picture may well be worth a thousand words, putting enough of them together is worth a billion dollar company.

M&A’s carried out by powerhouses have varying effects on the acquiree. LinkedIn, acquired for $26.2 billion dollars by Microsoft, has been left largely untouched from a user perspective. BlackRock’s $152 million dollar acquisition of robo-advising platform FutureAdvisor resulted in the formation of a new business unit headed under ‘Digital Wealth’. Others are not so lucky – Waterloo-based locker service BufferBox ceased operation only a few years after being bought by Google. Differences in autonomy and vision on behalf of the founders can also lead to internal feuds – Facebook most recently having experienced this phenomenon after the resignation of Instagram’s co-founders, as well as the #deletefacebook movement started by the co-founder of Whatsapp, Brian Acton.

It is unfortunate for both shareholders and customers alike, when M&As don’t have happily-ever-after success stories. Organizational alterations in management, pricing structure, and product integration, amongst a myriad of other changes, are all dictated by the terms of the deal. The success of a deal is rooted largely in a measurement of how well the new scheme performs in the market. Conclusively, the fate of a company cannot be perfectly predetermined; and in these ever-changing market conditions, the average Versace shopper can at least comment on the bargain of getting free ground shipping on $425 shirts – for now.

 

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