The technology world saw many strategic acquisitions and mergers during the last year that completely changed the way they performed. These deals changed things for both the acquirer and the acquired. These financial transactions had an impact on the stock market as well, giving good news to the shareholders and giving them hopes for a better 2015. Let us look at some of the game-changing deals that were made by some of the best technological companies.
Facebook taking over WhatsApp
The social networking giant Facebook (FB, Financial) acquired messaging services WhatsApp for a reported $19 billion; however when the final deal was closed out, its value was reported at $21.8 billion. This was undoubtedly the best acquisition of 2014 because WhatsApp already had billions of users on its network and Facebook only had to pay the money to get a wider reach of audience. This acquisition gave a huge impetus to the share prices of Facebook, thus enabling the company to gain deep inroads into the mobile technology sector as well.
Impact
The whopping $19 billion that Facebook splurged on WhatsApp didn’t go well with the shareholders. As soon as the deal was announced during February 2014, share prices of Facebook dropped by 3.4% at least during the early hours of trading. However, by the close of day, share prices were back on track again as investors had realised that Facebook had invested on an application that had close to 450 million users all over the world. To date, this deal is the costliest in the history of acquisitions. The previous highest was $8.5billion that was involved when Microsoft (MSFT, Financial) acquired Skype.
Microsoft merging with Nokia
Nokia (NOK, Financial) was a big brand name in the mobile sector in the early years. It enjoyed a loyal customer base and was the most trusted name in this sector until it started to lose out to other smartphones. This is when Microsoft Corporation stepped in and took over the entire hardware business, patents and other service and divisions of Nokia under its control for $7.2 billion. The deal proved to be a win-win situation for both the parties. It gave Microsoft the power to exercise control over one of the biggest divisions of Nokia, “Devices and Services.” It was this division that contributed to 49.5% of the sales for the first, second and third quarters of 2013 for Nokia. With Microsoft entering into the hardware business, it is all set to reap rich profits as it could use its research and Nokia’s design capabilities to good use.
Impact
As soon as the deal was announced, Microsoft’s shares saw a decrease by 5% during early trading hours, before settling down for the day. This was because investors were sceptical about Microsoft spending so much on a company that was expected to shut down its business any time soon. Microsoft wanted to earn a name for itself in the mobile sector as well, which is why this move was made. Nokia’s shares, as expected, witnessed a 30% jump after this deal was announced. This deal gave new hopes for the shareholders and assured them that the company was on the right track.
Lenovo taking over Motorola
Lenovo (LNVGY, Financial) recently bought mobile manufacturing company, Motorola (MSI, Financial) Mobility for a value of $2.91 billion last year. This move surprised many because, Motorola Mobility was bought by Google (GOOG, Financial) during 2012, when the former had hit rock bottom at the stock market. Due to Google’s brand power, Motorola slowly and steadily bounced back into operations by manufacturing the successful Moto G series of smartphones. However early last year, the hardware giant from China, Lenovo offered to take over Motorola from Google. One of the prime reasons for this deal was for Lenovo to enter into the U.S., Western Europe and Latin American markets, where it had not made great inroads and where Motorola enjoyed a reasonable brand image. Motorola enjoyed the advantages of Google backing, strategically operated patents and an Android operating system, which made it an attractive buy for Lenovo. Google has only sold off its control in Motorola’s hardware business. This deal brought about key changes in the financials of Google, Motorola and Lenovo.
Impact
Lenovo reported close to $321million profits for Q3 2013 powered by impressive performances in the PC and smartphone sectors – the latter mainly due to the acquisition of Motorola Mobility. As per analysts and stock market experts, Motorola might look a slight thaw in the books for a short period of time, but would do wonders for Lenovo’s financials in the long run.
Conclusion
All the above deals were done by the technology giants after carefully evaluating various market scenarios. These deals were worked out in a clever way so as to create a mutually comfortable scenario for both the parties. Though all of these look like well-thought about and deeply-researched deals, this year’s performance of the respective companies will help us understand the clear impact that these acquisitions had on their financials. Should we get to see more of such game changers in 2015, well let’s wait and watch.
