Top 4 Examples of Acquisitions

The following acquisition examples outline the most common types of acquisitions. Since there are thousands of such acquisitions, it is impossible to provide a complete set of cases that address every variation in every situation. Instead, each example offers an overview of the acquisition, the relevant reasons, and additional comments as needed.

An acquisition is when a company buys more than 50% ownership in its target. With gaining more than 50% in the target company, the acquisition company acquires the right to make decisions without the consent of the stakeholders of the target company. The acquiring company gets this ownership by purchasing the stock or the assets. The target company expects a premium paid over and above the current rate.

This article will provide you with the top 4 examples of acquisitions.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Acquisitions Examples (wallstreetmojo.com)

As highlighted above, the grocery sector average, including whole foods, over the last twelve months before the acquisition was 8.4x. It was before the announcement of Kroger’s lower earnings announcement.

Example # 2 – Sun Pharmaceutical Industries Ltd. acquires Ranbaxy Laboratories Ltd.

This pharmaceutical deal is an example of a share swap Share Swap A share swap occurs when one equity-based asset is exchanged for another equity-based asset. This is common in acquisitions and mergers. When a share swap is initiated, the share values of both companies are accurately priced to determine the fair swap ratio.read more deal. According to the deal, Ranbaxy Laboratories Ltd.’s shareholders would receive four Sun Pharmaceutical Industries Ltd. shares every five. It leads to a 16.4% dilution in the equity of Sun Pharmaceutical Industries Ltd. The deal size was $3.2 billion and was an all-share deal. The consolidated turnover of Sun Pharmaceutical Industries Ltd. was ₹11,326 crores. It acquired Ranbaxy Laboratories Ltd., a company with a turnover of ₹12,410 crores. Thus, Ranbaxy Laboratories Ltd. achieved a sales valuation of 2.2x last twelve months. The beauty of this deal is that a smaller company acquired a bigger company.

Ranbaxy Laboratories Ltd.’s share value was ₹457 per share; this represents an 18% premium to the thirty-day volume on the weighted average share price.

Reasons for acquisition – This was a strategic acquisition for Sun Pharmaceutical Industries Ltd. It would help them fill gaps in the U.S. and help them get better access to emerging markets, and gain a strong foothold in the domestic market. In addition, due to this acquisition, Sun Pharmaceutical Industries Ltd. also had the opportunity to gain the number one position from the current third position in the dermatology space.

As you can see in the above table, the net sales of Sun Pharmaceutical Industries Ltd. increased to 2,72,865, which shows the benefit it gained after the merger. Similarly, there is an increase in gross profitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and services.read more, EBITDA EBITDAEBITDA refers to earnings of the business before deducting interest expense, tax expense, depreciation and amortization expenses, and is used to see the actual business earnings and performance-based only from the core operations of the business, as well as to compare the business’s performance with that of its competitors.read more, and net profit. In addition, the balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders’ equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner’s capital equals the total assets of the company.read more highlights the strengthened position of the company after the merger in every aspect. The fixed assetsFixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples.read more have doubled, and the cash balances have also increased considerably.

Example # 3 – Microsoft and LinkedIn

Microsoft acquired LinkedIn for $196 per share in a $26 billion deal and fought with its competitor Salesforce.com, Inc. The shares of LinkedIn rose 64% after the announcement. It was an all-cash deal and included all of LinkedIn’s net cash Net CashNet Cash represent the company’s liquidity position and is calculated by deducting the current liabilities from the cash balance reported on the company’s financial statements at the end of a particular period. Analysts and investors examine it to have a better understanding of the company’s financial and liquidity position.read more. It represents a 50% premium to LinkedIn’s last closing price, which amounted to $9 billion. In addition, Microsoft bought LinkedIn at a lower price by 25% than its all-time high.

Microsoft financed this deal with the issuance of new indebtedness. As a result, the deal may dilute ~1% of the non-GAAP EPS.

This deal is mainly the 433 million LinkedIn subscribers and professional clouds. The core idea was primarily to boost data productivity.

Example # 4 – Disney and 21st Century Fox

Disney acquired 21st Century Fox for $71.3 billion, a real shakeup for the entertainment business. This deal brought together two major giants of the entertainment world. Disney won this deal from its competitor Comcast, which took nine months to get approval. It is one of the biggest deals in recent times. However, this deal may lead to laying off more than 4,000 jobs.

Assets changing hands in the deal include:

  • 20th Century FoxFox Searchlight Pictures, Inc.Fox 2000 Pictures – Fox FamilyNational Geographic Partners, LLCFox Networks Group InternationalIndian channels like – Star IndiaFox’s percentage interests in Hulu, Tata Sky, and Endemol Shine Group.

(Source- Company website)

Conclusion

There are various methods by which one can conduct acquisitions. It can either be friendly or hostile. As seen in the above examples of acquisition, only a large company does not need to have the capacity to acquire a small company. It is also possible the other way around, as highlighted in the Ranbaxy Laboratories Ltd. and Sun Pharmaceutical Industries Ltd. deal.

The company needs to take various pre-and-post steps before proposing the acquisition. The most crucial aspect to look at while going for an acquisition is the synergies, especially in the case of strategic acquisitions. The acquirer is looking to expand his business or gain assets and then use them to expand the business further. On the other hand, the target is looking for either control over operations or gains for its shareholders.

  • Types of AcquisitionMergers vs. AcquisitionsHow to Finance an Acquisition?Types of Mergers and Acquisitions