Mergers and Acquisitions

This is the war I mentioned earlier. This is your company starting a new life with another, with a different culture. Done wrongly, that may be the end of everything your company has worked for.

Entering a relationship in the corporate world connotes acquisition or a full-blown merger; M&A. M&As are beneficial to your company in many aspects. However, there are factors to consider before you take this bold step that will change your company’s existence.  

·         Customers and Market Share

According to Michael E. S. Frankel in his book, Mergers and Acquisitions Basics: The Key Steps of Acquisitions, Divestitures, and Investments, perhaps the single most powerful and obvious reason to acquire another company is for its customers. In essence, customers are the driver of revenue, and revenue is the first goal of business.


Access Bank: the biggest bank in Nigeria

Following its April 2019 acquisition of Diamond Bank, Access Bank became the biggest bank in Nigeria by total assets and number of customers as well as a significant retail footprint and infrastructure. According to Access Bank’s press release for the bank’s audited results for the Full Year ended December 31, 2019, “Our financial performance in 2019 was significantly influenced by the merger, as we recorded a modest growth in profitability.”

The Bank recorded gross earnings of N666.7bn (+26%y/y), and a 12% increase in Profit Before Tax to N115.4bn despite the significant merger cost.


Customer acquisitions can come in many flavours, Frankel writes. Buyers may simply seek to acquire more customer relationships. Buyers may also seek to acquire different kinds of customers. Different kinds of customers can mean new geographic regions, new demographic segments, or even new legal entities (such as business customers versus consumers).


Procter and Gamble (P&G) acquired Gillette

On January 28, 2005, P&G, one of the world’s largest consumer-packaged goods companies headquartered in Cincinnati, Ohio, announced what was reported the largest acquisition in its history. P&G agreed to buy Gillette in a $57 billion deal.

Following the acquisition, Gillette passed the following products and brands to P&G:

1.       Toothbrushes (Oral-B, Advantage);

2.       Electric toothbrushes (Braun Oral-B);

3.      Razors and Blades (Atra, Trac II, Good news, Sensor, Mach 3);

4.      Shaving foams and deodorants (Foamy, Satin care, Gillette series);

5.      Electric shavers (Silk epil, Braun syncho & flex)

6.      Personal care products (Right guard, Series soft & Dri, Dri idea); and

7.      Batteries (Duracell)


·         Economies of Scale

The idea is “bigger is better”.

Economies of scale is an age-long economic principle, and a simple formula big companies apply in carrying on business, i.e. become big, cut production unit costs, mass produce, and pass on the cost savings to customers by offering cheaper products.

M&As are fast and easy ways to increase volume (become big) and, thus, achieve greater economies of scale.

Commenting on the P&G acquisition of Gillette, Sean Egan, Managing Director of the Egan-Jones Ratings Co. tells CBS Radio News that, “It’ll enable both Gillette and Procter & Gamble to get better shelf space and to distribute their products more cheaply.”


·         Geographic Reach

The use of M&A to accelerate geographic expansion is a well-known business strategy. And when you find the right partner, the benefits can be huge.

Frankel writes that expanding into a new geographic region is challenging on a variety of counts. In addition to the logistical challenges of setting up a local operation and facilities and developing relationships with local suppliers and customers, there is a broader challenge of understanding and operating within a new local culture. For some companies and in some situations, acquiring a local presence is easier and faster than building one.

In overcoming these challenges, companies, over the years, have resulted in wooing partners from different geographical locations in a bid to spread their tentacles over those regions.


Access Bank acquired Transnational Bank and Cavmont Bank

On July 20, 2020, Access Bank completed its acquisition of Kenya’s Transnational Bank PLC, in line with its vision to expand its footprints across Africa. And by August 6 of the same year, Access Bank extended its tentacles into Zambia when it was reported that its subsidiary, Access Bank Zambia, had reached an agreement with Cavmont Capital Holdings Zambia PLC to acquire Cavmont Bank Limited.

Previously, in December 31, 2019, Access Bank obtained the Central Bank of Guinea’s approval, after prior approval by the Central Bank of Nigeria, to set up a subsidiary in the country through 100 percent acquisition of a local bank at an estimated cost of $14 million.

It should however be noted that there are no automatic outcomes when it comes to expanding across regions through M&A. Sometimes, an M&A deal will not deliver as expected or can bring more complexity than anticipated.


·         Technology/Product

The need to acquire technology or certain product may be the motivation for M&A.


eBay acquired ExpertMaker

On May 5, 2016, eBay announced its acquisition of ExpertMaker, a Swedish company with specialisation in providing solutions powered by artificial intelligence, machine learning and big data analytics, in a bid to bring more artificial intelligence, machine learning, and big data analysis into its online marketplace platform.

“As a part of eBay, Expertmaker’s technology, expertise and talented engineers will play an important role in helping advance eBay’s structured data initiative,” comments Amit Menipaz, Vice President and General Manager of Structured Data at eBay at the time. “eBay’s structured data effort is a multi-year journey, and we believe the innovation and significant expertise that Expertmaker brings to eBay will help us build a best-in-class product catalog and, in turn, better serve our customers.”


The acquisition of a new technology or product can fit into Buyer’s business strategy in a variety of ways, according to Frankel. The new product can be added to the Buyer’s existing products to create a broader suite and add to its existing customer base.


Yahoo! broad product acquisitions

Yahoo! acquired online communications company Four11 on March 8, 1997. Four11’s webmail service, Rocketmail, became Yahoo! Mail. Yahoo! also acquired ClassicGames.com and turned it into Yahoo! Games. On October 12, 1998, Yahoo! acquired direct marketing company, Yoyodyne Entertainment, Inc. Yahoo! acquired web hosting provider, GeoCities. Yahoo! also acquired eGroups, which became Yahoo! Groups after the acquisition on June 28, 2000.

Yahoo! continued acquiring companies to expand its range of services. On March 20, 2005, Yahoo! purchased photo sharing service Flickr. In June 2005, Yahoo! acquired blo.gs, a service based on RSS feed aggregation. Yahoo! also bought online social event calendar, Upcoming.org, on October 4, 2005. Yahoo! acquired social bookmark site, del.icio.us, on December 9, 2005 and playlist sharing community, webjay, on January 9, 2006.


·         Differences/Market Position

Here, you acquire a target to strengthen or bolster your market position. In this situation, as rightly pointed out by Frankel, you focus not merely on growing your business but also on maintaining or expanding your position relative to your competitors.


Google acquired Motorola; cracked down Samsung

When Google acquired Motorola Mobility for $12.5 billion in cash on August 15, 2011, it was not looking to make any profits from the business since Android already had a far bigger market share. Google wanted to have access to all the patents (more than 20,000 mobile patents) in Motorola’s kitty to bolster its own cell phone manufacturing business. This was a strategic investment that allowed Google unprecedented access to mobile phone manufacturing technologies that it could build upon, license out, or stop its competitors from using.

Google used its access to the mobile patents to crackdown Samsung’s “disrespect” to its Android, and thereby bolster its market position.

According to an article in Forbes by Gordon Kelly, “The problem is Samsung wanted too much credit. It wasn’t enough for Samsung to make the most popular Android phones and tablets, it had to hide Android – and consequently Google’s role in its achievement. It did this using ‘TouchWiz’, the company’s proprietary skin which painted over all aspects of Android leaving it unrecognisable. To the casual consumer they were buying ‘a Samsung’, Google’s role was largely unrecognised.”

“Then things got worse. Samsung began degrading Android performance by switching out vast parts of the software – phone dialler, calendar, email client, contacts, notification centre, music and video player, voice control and much more – for its own apps. Reviews were largely negative with TouchWiz and its bloatware slowing down Android, wasting storage space and the replacement apps were seen as inferior or, worse still, needless gimmicks.

“Samsung then exploited this further. It put TouchWiz on its smart TVs, another market it dominates, and began building its own Android rival – Tizen – which, thanks to its TouchWiz interface, looks identical to the casual observer. The long-term strategy was clear: switch over to Tizen and take the majority of the handset market with it. Google had to act.”

But how?

According to Kelly, Google set a bait with the help of its acquired company, Motorola Mobility: obliteration by Google stock Android handsets unless manufacturers (read: Samsung) stopped messing with Android. Google quietly showed it could walk the walk as well, as it ramped up Nexus production and introduced the well-received Motorola X and Motorola G which stripped away almost all customisation from stock Android.

“Samsung bit,” writes Kelly. “On 27 January 2014, Google and Samsung signed a wide-ranging global patent deal which will last a decade. Buried within it was an agreement that Samsung would tone down TouchWiz, refocus on core Android apps over its own customisations and cancel more radical customisations such as its ‘Magazine UX’ interface. Two days later, Google announced the sale of Motorola Mobility to Lenovo showing both agreements had been working in parallel.”

Don’t you just love Google?


A possible bottleneck to consider alongside each factor above before entering M&A is the integration of the merged/acquired company with your company or your other portfolios. Among others, a way of resolving this integration issue is through a friendly takeover.


Facebook acquired WhatsApp

In 2014, Facebook Inc. announced the acquisition of the mobile messaging company, WhatsApp, in a friendly takeover. According to the statement issued by Facebook, the deal was intended to “support Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core services efficiently and affordably.”

Facebook acquired all outstanding shares and options of WhatsApp for $4 billion in cash and 183 million of Facebook Class A common shares. Additionally, Facebook assigned more than 45 million restricted shares to WhatsApp’s employees. The total value of the deal was estimated at around $19 billion.

Following the acquisition, WhatsApp retained its brand and continued functioning, as the company’s operations remained independent from the operations of Facebook. Also, WhatsApp’s co-founder and CEO, Jan Koum, obtained a seat on the board of Facebook.


Finally, just like human relationships, the best corporate relationship does not always last forever. When your company needs to part ways with another company, you must however endeavour to look for the most amicable divorce for your company. This leads us to the last part: corporate divorce.