Acquisitions can be very fruitful if both the acquirer (the company to purchase) and target (the company to be sold) are well managed and the way in which the two companies will be combined is well-planned to ensure that synergy is achieved.
Companies merge all the time, but not all of them manage a successful integration. Here we look at the latest corporate pairings.
Tutorial: The Basics Of Mergers and Acquisitions
Google Acquires Admob
In a $750 million deal that just closed, Google (Nasdaq:GOOG), the leader in advertising, plans to acquire the fairly new yet successful mobile advertisement company, Admob, after getting clearance from the Federal Trade Commission (FTC).
The FTC recently granted the clearance for Google to proceed with its acquisition, and dismissed potential illegal competition fears, after investigating for potential antitrust issues. Apple (Nasdaq:AAPL) recently acquired Admob's competition, Quattro Wireless. Thus, the FTC found that the Admob acquisition would not harm competition in the emerging market for mobile advertising. (To find out more about antitrust, read Antitrust Defined.)
Admob has recently found success placing simplified ads on the iPhone.
Yahoo! Takes Over Associated Content
Yahoo (Nasdaq:YHOO) news sector may have a new strategy for building its growing dominance in news and advertising, hoping to take away market share from its competitors and target a wider range of audiences. In May, Yahoo!, based out in Sunnyvale, Calif., has sealed the deal to buy out Associated Content. According to Yahoo!, it purchased Associated Content to increase the amount of information on its site, which it hopes will benefit the site's estimated 600 million users.
Associated Content was founded in 2005 and is headquartered in New York and Denver. Its business strategy involves user-generated content and the site, according to ComScore Inc., gets roughly 16 million unique visitors per month. Freelance writers submit around 50,000 unique pieces of media per month and are compensated for their work based on page views.
Yahoo's purchase of such an established company should generate more revenue. Although it is hard to speculate about either corporation's agenda, the acquisition has certainly put Associated Content's unique business model on the map.
Fairfax Acquires Zenith National
Fairfax Financial Holdings Limited (OTC:FRFHF), a Canadian insurance company, is engaged in property and casualty insurance and reinsurance and investment management through its subsidiaries. Zenith National Insurance Corporation is a holding company focused on workers' compensation headquartered in Woodland Hills, CA.
In late May, Fairfax acquired Zenith's outstanding common stock for $38 per share. This acquisition reflects the company's strategy of investing in well-positioned companies.
Just a Rumor: Best Buy and RadioShack Merger?
Former competitors Best Buy (NYSE:BBY) and RadioShack (NYSE:RSH) are rumored to be joining forces for a $3 billion merger. RadioShack, which was founded in 1921, met its match with Best Buy. But after the initial rumors surfaced in the New York Post, conversation has been left to a minimum as of late.
The move to bring the two companies may be an attempt to stake out some territory in the handheld devices industry, and meet growing demand for these wireless gadgets.
Why M&As Matter
Mergers can allow companies to combine forces and stake out a greater portion of market share. But they often fall through at the last minute - and even when companies do merge, the outcome isn't always a success. Keep an eye on these newly merged companies; it's likely that only a few will achieve the successful corporate pairing they are hoping for.
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