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The 5 Biggest M&A Deals of All Time

By Alert Investor - Mar 3, 2016 at 9:03AM

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There have been some huge deals lately, but still none bigger than one back in 1999.

This is the second in a three-part series on mergers and acquisitions.

Last year was a record breaker for global M&A -- but if you thought the biggest deal in corporate history took place in 2015, you'd be wrong.

In fact, that crown still belongs to a union dating all the way back to 1999: British telecom giant Vodafone's $172 billion purchase of German conglomerate Mannesmann.

Still, two of the five largest M&A transactions in history were indeed announced in 2015. Pfizer's pending $160 billion deal with Allergan PLC and Anheuser-Busch InBev NV's $106 billion tie-up with SABMiller PLC, both of which are expected to close in the latter part of this year, nabbed the No. 2 and No. 4 spots, respectively. Both of these recently announced megamergers involve rivals joining forces to create the dominant players in their respective industries.

Here's a list of the top five biggest M&A deals in corporate history, ranked by Dealogic.

(Dealogic based its ranking on valuations at the time the deals closed. In the case of pending transactions, recent valuations were used.)

1. Vodafone AirTouch Scoops Up Mannesmann (1999) ($172 billion)
The biggest deal of all-time started as a fierce, cross-border hostile takeover.

Back in 1999, old-fashioned, voice-only cell phones were booming, smartphones were just starting to go mainstream, and Vodafone -- Britain's largest wireless company -- was eager to buy Germany's leading wireless carrier, Mannesmann.

At the time, hostile takeovers were rare in Germany. Determined to remain independent, Mannesmann fought off its British rival for three months. At one point, Mannesmann tried to merge with another company, France's Vivendi, only to watch Vodafone strike a deal of its own with Mannesmann's would-be white knight.

The German company gave up when it became clear that its shareholders supported Vodafone's offer. The ensuing union spawned the world's largest mobile-phone company.

2. Pfizer and Allergan Agree to Merge (2015) ($160 billion)
Pfizer's $160 billion pending union with its rival, Allergan is historic -- and not just because it would create the biggest pharmaceuticals company on the planet.

The deal, which would put Allergan's fast-growing drug Botox and Pfizer's Viagra and Celebrex, under one roof, is also the largest so-called corporate "inversion" to date.

Inversions allow U.S. companies to incorporate in countries where tax rates are lower. By merging with Dublin-based Allergan, U.S.-based Pfizer will substantially lower its tax bills.

The White House and other critics call inversions unpatriotic and the U.S. Treasury Department recently passed rules aimed at limiting them. But the Allergan/Pfizer union was structured so that Allergan, the foreign company, is the buyer, meaning the deal might be able to sidestep the new anti-inversion rules.

3. Verizon Communications Buys Verizon Wireless (2013) ($130 billion)
Vodafone figures twice on the list of five biggest deals of all time, but this time around, the British telecom giant was a seller, not a buyer.

Three years ago, U.S.-based telecom Verizon Communications decided to take a big bet on the future of cell phones and broadband services. Verizon spent $130 billion to buy the 45% stake it did not already own in Verizon Wireless, from its joint-venture partner Vodafone.

When the deal was announced, Verizon Wireless had about 100 million customers and Verizon Communications CEO Lowell McAdam predicted "a big phase of growth in the U.S. telecom market." Today Verizon Wireless is the country's largest wireless carrier with 137.5 million subscribers.

The deal was notable not just for its size, but also for the way it was financed. Verizon issued $49 billion worth of bonds, in what is still the largest corporate bond issue of all time, according to Dealogic.

4. Anheuser-Busch InBev Strikes a Deal to Acquire SABMiller (2015) ($117 billion)
Brew on this: The $117 billion union of these two beer companies would create an industry giant responsible for making close to one-third of all beer sold around the globe.

Last year, Belgium-based Anheuser-Busch, the world's largest brewer, went shopping for the right merger partner to help ramp up its slowing sales, and found it in U.K.-based SABMiller.

SABMiller's initial response to Anheuser-Busch's overtures was lukewarm. In fact, SABMiller turned down Anheuser-Busch multiple times before accepting a bid that was 50% higher than its closing price the day before word of a potential deal hit the media.

The union would create a brewery behemoth with $64 billion in sales from such well-known brands as Budweiser, Stella Artois and Pilsner Urquell.

Anheuser-Busch's purchase of SABMiller must still meet the approval of antitrust regulators in multiple countries. If the deal doesn't go through, SABMiller won't necessarily be crying in its beer as Anheuser-Busch has promised to pay its target a hefty $3 billion breakup fee.

5. America Online Nabs Time Warner (2000) ($112 billion)
America Online
's $112 billion purchase of Time Warner may be the fifth biggest M&A deal of all time, but it's far better known as one of the worst corporate marriages in history.

Sixteen years ago, the merger of AOL -- the company that brought the Internet to the masses -- and Time Warner, the biggest news and entertainment giant in the world, was hailed as the perfect blending of old and new media.

When the deal was announced, AOL CEO Steve Case proclaimed it a "historic moment" and predicted the combined company would "fundamentally change the way people get information, communicate with others, buy products and are entertained -- providing far-reaching benefits to our customers and shareholders."

To say it didn't turn out that way is an understatement. Within a matter of months after the deal closed, the dot-com bubble burst and the economy began to tank. The cultures of the two companies proved to be vastly different and much promised synergies failed to materialize.

In 2003, AOL Time Warner reported an annual loss of $99 billion that included a sizable charge reflecting the declining value of AOL. By 2009, more than $100 billion in shareholder value had been lost and Time Warner decided to spin off AOL, putting an end to their ill-fated marriage.

The lesson for investors: Just because companies promise that mergers will yield benefits doesn't mean those benefits will materialize. Dig deep into the assumptions that go into those predictions and consider the risks before you go gaga over M&A deals.

An Alert Investor is a smarter investor.

This article originally appeared at The Alert Investor.

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