Takeovers and Mergers - How to Destroy 99% of a Takeover’s Value

Microsoft’s takeover of AQuantive for $6.3bn in 2007 must now go down as one of the least successful acquisitions in recent history. In its most recent quarterly results, Microsoft has announced that it is “writing down” the value of its investment in AQuantive by $6.2bn (i.e. just about all of it), to reflect the significantly lower value of the business just five years on.

This is a great example for students to add to their notes of how external growth can fail to provide acceptable returns for shareholders. Microsoft pays $6.3bn for AQuantive. Now it estimates the business is worth just $0.1bn - a huge loss of shareholder value.

Why has this happened? AQuantive was acquired as part of Microsoft’s strategic objective of gaining market share of online display advising from rival Google. Just weeks before, Google had acquired another online advertising platform called DoubleClick. Google won - it has since gone on to dominate the online advertising market.