When we published our piece on seven of the best media acquisitions of the 21st century, we promised a follow-up featuring some of the worst. So, with thanks to all those who offered their suggestions here they are…
1. AOL buys Time Warner for $164 billion in 2001
There really is no better place to start than the AOL-Time Warner merger. Pushed through at the height of the dotcom boom, this deal isn’t just a candidate for worst media M&A deal of the 201st Century, it’s a candidate for the worst M&A deal of the last 13 years full stop.
At the time, the $164 billion (in today’s money that’s £109 billion) acquisition by AOL was the biggest deal in history. A Bear Stearns analyst was memorably quoted as saying that: “If their mantra is content, this alliance is unbeatable. Now they have this great platform they can cross-fertilize with content and redistribute.”
Of course, Bear Stearns itself was out of business less than decade later, but it took a lot less time for the AOL/Time Warner deal to turn sour. By 2002, the group had taken a $99 billion write down as the dot come bubble collapsed around them.
With perfect hindsight, Time Warner CEO Jeff Bewkes in 2010 described the deal as “the biggest mistake in corporate history” and said it was clear what companies needed: “Everyone needs to think carefully about what their function is in the modern world and the value of the activity that you and your company are doing”.
Whether he would have been so forthright if he’d overseen the deal himself is another matter. The two businesses finally completed a divorce in 2009. AOL has only recently begun turning its business around under CEO Tim Armstrong, while Time Warner is still trying to repair the damage, most recently with plans to spin-off magazine unit Time Inc.
2. News Corp buys MySpace for $580 million
Rupert Murdoch may be seen as the epitome of old media, but that hasn’t stopped him trying to keep up with the new. News Corp’s acquisition of MySpace – if not quite a stroke of genius – did seems like clever dealing at the time, with the West’s biggest media conglomerate snapping up the most talked-about site around.
MySpace was already profitable and had a clear lead on its new rival Facebook, at that time still restricted to university students. The idea at the time was that MySpace would drive traffic to other News Corp properties such as the Fox network’s sites.
But by 2009 it was clear News Corp had backed the wrong horse, or at least ridden it into the ground. That year, Facebook overtook MySpace and was well on its way to becoming the default social network for more than 1 billion people.
It can be argued that MySpace was a good buy, but news Corp simply handled it badly. News Corp definitely made a lot of mistakes with MySpace, not least in terms of design and trying too hard to monetise the service rapidly.
The site was eventually sold for $35 million to Specific Media, and including the money it poured in, News Corp is estimated to have lost as much as $1 billion on its social media adventure. Murdoch himself put it succinctly last year.
Many questions and jokes about My Space.simple answer -we screwed up in every way possible, learned lots of valuable expensive lessons.
— Rupert Murdoch(@rupertmurdoch) January 13, 2012
3. AOL buys Bebo for $850 million in 2008
Another example of a misguided social media buy, AOL’s attempt to buy its way into the social media craze with the purchase of Bebo was if anything even more of a disappointment than MySpace and ended in a very similar form of ignominy.
Bebo was the second largest in its native UK and especially popular with teenagers and students. AOL talked up the obvious synergies with its advertising network, but the deal in many ways felt like another “me-too” buy to cash in on the then unavoidable social media craze.
It didn’t work out well with Bebo failing to gain any traction outside its home market. Just two years later AOL sold the network to Criterion Partners for just $10 million. The only upside? AOL used the sale to write off the whole original purchase price, delivering a tax break worth upwards of $275 million.
4. APAX/Guardian buy Emap for £1 billion in 2008
In 2008 Emap, formerly the country’s biggest media company with interests spanning an unlikely consumer-b2b-radio-events empire, was in the mood to divest. While German mag giant H Bauer got the glossy consumer titles, Guardian Media Group and private equity group Apax Partners swooped in to buy the B2B assets, paying around 470p per share, giving it a valuation of about £1 billion.
It was an attractive operation with big events and growth, but the buyers underestimated the amount of change necessary to remain profitable and the group was hamstrung by debt.
Having paid for the group at the top of the market, the new owners were just two years later forced to inject cash to keep it afloat. It has since been renamed Top Right Group, and split into four divisions, but it's safe to say the original investment has not gone to plan.
5. Johnston Press – various acquisitions 2000-2006
@mediabrief Johnston Press spent £500m on local newspaper acquisitions in 2005 alone including The Scotsman-total market cap is now £80m :-/— jamescoops (@jamescoops) March 13, 2013
In 2005 Johnston Press went on an acquisition spree across UK and Irish local media picking up a slew of titles, including The Scotsman, for which it paid £160 million.
It was, like the EMAP deal, a case of terrible timing. The bottom has since dropped even further out of the local media market, and Johnston’s total market cap is now just £80 million – less than half what it paid for The Scotsman.
6. Time Warner buys Business 2.0 for $68 million in 2001
This is one that might easily have been forgotten, but nevertheless deserves a mention. Immediately after the dotcom bubble popped you might have forgiven media companies for taking a more cautious approach to M&A. Not so Time Warner which in 2001 bought Business 2.0 – a magazine following growing interest businesses.
Like so many failed acquisitions, it was the integration process that undermined a once healthy business. Attempts to save money by combining sales teams under the newly-formed Business and Finance Network which included Fortune backfired and it’s place within the far bigger empire led to what has been described as “corporate neglect”.
In late 2007, Time Inc announced it was shutting Business 2.0 due to falling ad pages.
7. Most of Yahoo’s acquisitions of the last decade and beyond
It’s hard to know where to start with Yahoo. The list of companies and products it has bought, minced, then discarded, is too long to count. Kelkoo, BlueLithium and Delicious are just some of the many acquisitions that have either been sold on at a loss or simply wound up (here’s a useful roundup of exactly how Yahoo messed up some promising new additions).
Perhaps the only standout success is photo-network Flickr which became the de-facto online photo-sharing tool. However, even Flickr is in danger of receding into irrelevance
Almost as impressive is what Yahoo didn’t buy. Both Google and Facebook were reportedly feasible acquisition targets at one time or another, though what would have become of either under the Yahoo umbrella is anyone’s guess. The firm also rejected a buyout offer from Microsoft at a time when it’s share price was significantly higher than it has been for years.
New CEO Marissa Mayer is being ruthless in weeding out under-performing parts of the business. Whether she is also able to break with tradition and make some clever buys we will have to wait and see.
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