Global Strategy and Management

INTERNATIONAL MERGER ACQUISITION FAILURE 2

Bruna Spera Martins

Southern States University

BU536 – Global Strategy and Management

Instructor: Dr. Javier Wedekind-Flores

Running head: INTERNATIONAL MERGER ACQUISITION FAILURE 1

International Merger Acquisition Failure

The general expectation in mergers and acquisitions is that the firm’s shareholder value post mergers or acquisitions would be greater compared to the total shareholder value of the parent companies before the process is completed. Similarly, the parent companies, especially the smaller and weaker one, would tremendously benefit due to an enhanced market share, competitiveness, and cost-efficiencies. Some of the most ideal situation when mergers and acquisitions are appropriate includes when companies wish to introduce new products, avail some administrative benefits, and enter a new market. Although there are many business and companies such as Time Warner, Google, Microsoft, eBay, BMW, etc. who have been successful in mergers and acquisitions, some have never been so lucky because their process have often ended in failure.

The acquisition of Motorola by Google in 2012 is amongst the worst in the history of merger and acquisition. Google obtained Motorola for $12.5 billion with the aim of using the brand to build top-quality mobile devices because Google’s Android OS had already started off with a massive market share (Epstein, 2014). Motorola however broke the promise by releasing a variety of low-quality mobile devices. They even failed to upgrade the old phones to the latest Android OS for the consumers. To further worsen the matter, Google continued to release mobile devices called Nexus, which, were produced under the partnership with LG, Asus, and Samsung. The implication for such a partnership is that it led to the wearing away of the Motorola acquisition’s value even further. Then, the shocker came when Google had to offload its $12.5 billion purchase for about $2.9 billion to Lenovo two years after the acquisition.

The offload was necessary although Motorola’s Moto X had at one point shown positive performance in the market. The sale covered Motorola’s deferred tax assets, handset division, cash on hand, home business, amongst other things (Epstein, 2014). However, Google still retained Motorola’s patent portfolio after the sale. The biggest mistake that Google made, regardless of the fact that it was faced with a critical dilemma, was to buy Motorola in order to save Google’s Android OS. The move was unprecedented because it is very few companies that trade in software which [have ever successfully] shifted to hardware. Secondly, the new acquisition meant that Google had to compete with its software clients such as HTC and Samsung which are also known to offer top-notch Android-based tablets and mobile phones.

Third, Android software are not primarily meant to generate much money. Hence, by investing in the new merger, Google had only dreamt of holding onto the search revenue from Google OS as more people move to cloud-based devices from their personal computing devices. However, Motorola was a bad choice because it only had a 9% competition share in the mobile phone’s marketplace, and hence, the last finisher (Hartung, 2011). Thus, Google was supposed to think through the products’ ramification and its business model before introducing it to the market. The reason is that [the Google’s] Android software was never created as a profitable growth opportunity but as a way to defend its search engine business.

References Epstein, Z. (2014, February 13). Google Bought Motorola for $12.5B, Sold it for $2.9B, and Called the Deal ‘A Success’. Retrieved May 7, 2020, from BGR: https://bgr.com/2014/02/13/google-motorola-sale-interview-lenovo/ Hartung, A. (2011, August 18). Google's Big Mistake - Buying Motorola to Save Android. Retrieved May 7, 2020, from Forbes: https://www.forbes.com/sites/adamhartung/2011/08/18/googles-big-mistake-buying -motorola-to-save-android/#7b33fb2c5f26