In Apparently when Santa he of the popular Santa Banta fame came to know that Microsoft had shelled out $8.5 billion for Skype, he was flabbergasted. Arre. Why did they waste so much money they could have downloaded it for free, he jokingly chided. Well, not only Santa but a lot of people across the length and breadth of the globe questioned Microsofts latest move into the internet voice and video-calling domain. The case with Skype is a bit unusual.
Founded in 2003, the company was acquired by eBay in 2005 for $2.6 billion. After a wide array of things went awry, eBay sold out 70% of its stake to a consortium of investors in 2010. Microsoft then stepped in this year, deciding to buy out the struggling behemoth for the aforementioned mammoth sum. Mergers and acquisitions are often like eating caviar you either like it or you dont. But either way, it is a costly, and oftentimes a ghastly, proposition. History is littered with instances of how even the best of companies got it completely wrong, splurging billions and losing even more by the time the divorce was settled.
Back in 1999 KPMG on assessing some 700 expensive mergers from 1996-99 postulated that four out of every five deals failed miserably. These numbers have more or less stayed the same even after a decade.
Lets visit a few of these horrible goof-ups and what it cost the companies.
The one that tops the list is indisputably the fancy marriage between AOL and Time Warner. In 2001, print giant Time Warner acquired online major AOL for a whopping $111 billion. Things went completely downhill from there until finally, in 2009, Time Warner washed its hands of AOL, writing off billions.
Before Facebook became popular there was MySpace. News Corporation hedged its bet on social networking and bought out the company for $580m in 2005. Sadly for them, Facebook was nimble and fast and captured the whole market, displacing MySpace. These days, the social networking company is on the block waiting for a new buyer.
AOL was also involved in yet another horrendous M&A deal. In 2008, it acquired social media company Bebo, for a sum of $850m. Just two years later, AOL sold out for just $10m.
In yet another instance, before YouTube, there was Broadcast.com a site similar to YouTube. At the height of the dotcom hysteria in 1999, Yahoo bought out Broadcast.com for $5.7 billion. Sadly for them, since broadband had not yet gone mainstream, Broadcast.com could not capture the same ground as YouTube and Yahoo lost out on most, if not all, of its multi-billion dollar investment.
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