2015: A Year of Mergers, Acquisitions, and More

Over here at the Austin offices of social trading network, Peeptrade, we were thinking about all the changes we’ve undergone in the past year. There were many  events and awards we won, and of course all the chaos in between. That’s when we got to thinking about the year in general, and man it’s been a crazy one! From Drake’s Carlton-esque dancing in Hotline Bling to Volkswagen’s emissions scandal to the death of an iconic lion by a deranged dentist, we’ve been through quite a lot. Just as crazily, though, this year has been filled to the brim with massive mergers, acquisitions, and other deals. In our take on the year in review, we’ve sat down with Charlee Garden, a management professor at the University of Texas at Austin and expert in organizational behavior, about the complications and impacts on shareholders these types of deals have.

In our chat with Professor Garden, we talked about deals between AB Inbev and SAB Miller, Dow and DuPont, Dell and EMC, and Heinz and Kraft Foods. Before we dive in too deep on the specifics of each deal we’ll be focusing on, here’s some basic information in case you’ve been living in a cave for the past twelve months.

1. AB Inbev and SAB Miller

   Value: $106B

   Sector: Beverages

   Notes: After the merger, the new massive brewer will control around 29% of

   global beer volume.

2. Dow and DuPont

   Value: $68.6B

   Sector: Agriculture, material science, and specialty products

   Notes: According to USA Today, this deal will be the 18th largest merger of all

   time.

3. Dell and EMC

   Value: $67B

   Sector: Technology

   Notes: Dell’s acquisition of EMC is the largest deal in tech history.

4. Heinz and Kraft Foods

   Value: $62.6B

   Sector: Food and Beverages

   Notes: The newly created Kraft Heinz Company is now the fifth-largest food  company in the world by annual sales.

When looking at these deals the first thing to do is recognize that they are all very unique. It would be foolish to look at the Heinz and Kraft Foods merger the same way as the Dow and DuPont merger. Companies merge and strike deals for a whole host of reasons. Typically, these mergers and deals revolve around the “hard” elements of business like finance and marketing. However, it’s not always these “hard” elements that lead to business success.

“Typically companies look at the financial and marketing rationale for merging and overlook the ‘softer’ elements of culture,” said Garden. “The softer elements of culture tend to be the primary factor that influences the success of a merger.”

Moving forward, each of these companies should take a close look at its culture and evaluate how the deals could affect the overall organization. Does Dow share the same beliefs and values as Dupont? Are there rituals and practices at Heinz that don’t exist at Kraft? What differences in leadership style exist between AB Inbev and SAB Miller? These are questions that are important to consider when evaluating the impact of a merger.

Equally important is to look at why two companies are merging. Is one of the two companies in financial trouble and looking for a way out? Are the companies trying to enter a new, hard to penetrate market? First, you have to figure out what’s going on. Then, you can really start getting into the nitty gritty of how these mergers and deals might affect investors.

When asked about the impact mergers and big deals have on investors and what she would hope to expect from an organization if she were to invest, Garden explained that “companies that merge as a part of a growth strategy are more appealing to [her] than companies that are hoping to capture economies of scale due to the merger.”

Even if a merger or deal is part of a growth strategy and creates a unique value proposition, Garden explained that a smart investor should always look for transparency of communication. As mentioned earlier, you have to know what’s going on. There’s just something about deals being struck behind closed doors and mergers being agreed upon in shadowy rooms that just sends a negative vibe to investors.

The one piece of advice we gathered from our interview with Garden was to always do your homework and to know what’s going on at all times. If you’re looking to invest in a company that’s about to enter a huge deal or merger, familiarize yourself with each of the organization’s cultures. Look for challenges the companies might have in leadership. Question why the merger is happening in the first place. If you can’t find any answers to these questions, that in and of itself gives you a pretty good idea of the type of deal that is being struck.
This year was certainly a crazy one. It’s true. But with each year comes new knowledge that we can use in the next. If there’s one thing we learned from this one, it’s to never stop asking questions and to never stop looking for answers in new places. Be it on a social trading message board or from an interview with an expert in organizational behavior, every little piece of news and insight you get helps you make better decisions. Now, if we could only get organizations to learn as well…

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