The Best M&A Deals of the Decade

The past decade has certainly been tumultuous for mergers and acquisitions. As we went into the new millennium, the U.S. economy hit the peak of the dot-com bubble and M&A activity reached $1.2 trillion. Of course, this is when Time-Warner (TWX) agreed to a whopping $182 billion merger with the now-independent-again AOL (AOL).%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% However, M&A activity quickly evaporated with the arrival of a recession, the exposure of major corporate scandals and the 9/11 attack. It wasn't until 2004 that dealmaking picked up: with cheap capital, a growing economy and the emergence of private equity, M&A peaked again at $1.2 trillion in 2007, with about $794 billion coming from private equity transactions.

Then, of course, the M&A market plunged again because of a credit crunch and severe recession. In fact, deal activity still remains fairly light, although some signs hint at a resurgence, such as seen recently by the Exxon-XTO megadeal.

So, in the midst of all this, what were the best deals of the decade? Like anything of this sort, these choices are highly subjective and will probably result in a good amount of disagreement. But here are my picks:

JPMorgan (JPM) buys Bear Stearns and Washington Mutual:
Jamie Dimon became the chief of JPMorgan in 2006, which was the result of a merger with Bank One. Unlike his peers, he understood that patience can be an M&A virtue. As a result, he focused on building his capital base and bolstering risk management.

When the financial system went into a tailspin, Dimon had the firepower to capitalize on the opportunities. For relatively little money, JPMorgan purchased Bear Stearns and Washington Mutual, deals that helped Dimon to expand his investment banking footprint as well as his deposit base (especially in big markets like California and Florida). And yes, he got attractive government support in these transactions.

News Corp. (NWS) buys MySpace:
Launched in 2003, MySpace quickly turned into a phenomenon. As social networking became the "next big thing," it also promised to be a strategic asset for the rapidly changing media business. Yet, MySpace had a problem: the website was stuck in a complicated structure from its parent company, Intermix. But News Corp.'s Rupert Murdoch saw this as an opportunity to pluck the asset at a bargain price of $580 million (in 2005). He was also able to outmaneuver the dealmakers at Viacom (VIA), who failed to read some key documents.

By 2006, MySpace snagged a $900 million advertising deal with Google (GOOG).

While it's true that MySpace has lost it luster to Facebook, the fact remains that the site is still a formidable force and has critical synergies with the traditional media assets of News Corp.

Equity Office Properties sells to the Blackstone Group (BX):
When it comes to buying cheap commercial real estate, Sam Zell is the master. Actually, his nickname is the "Grave Dancer." Then again, he has had lots of practice. Back in 1976, Zell founded Equity Office Properties and built an empire through savvy acquisitions. By 2006, the company had 600 office buildings across 16 states.

But Zell realized that the markets were getting frothy. So why not sell out at the top? That's what he did when he agreed to a $35 billion buyout deal from the Blackstone Group. Unfortunately, Zell's next deal was not so promising. He bought Tribune Co., which eventually went bust.

eBay (EBAY) buys PayPal:
eBay's M&A track record has been spotty, as seen with the problems with its acquisition of Skype and even its attempted purchase of Craigslist. Despite this, the company pulled off a stellar deal with the $1.5 billion purchase of PayPal.

eBay had already tried to build its own e-payments solution, but it was too late. PayPal was becoming the category leader and also had some powerful technologies, especially with fraud detection. Now, PayPal is a key to eBay's growth and is gaining lots of ground in foreign markets. In the latest quarterly report, the payments division recorded $688.1 million in revenues, which was a 15% increase over the prior year's results. There are about 78 million active users on the platform.
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