Not every acquisition is a success. Some of the biggest deals in tech history have resulted in massive write-downs, executive departures, and destroyed shareholder value. These failures offer valuable lessons about what can go wrong when companies combine.
The Worst Tech Acquisitions Ever
1. AOL - Time Warner (2000)
$165B → Write-offWhat happened: AOL acquired Time Warner at the peak of the dot-com bubble. The deal valued AOL at $164 billion based on dial-up internet subscriptions that would soon become obsolete.
The fallout: $99 billion write-down in 2002. AOL spun off in 2009. Considered the worst merger in corporate history.
Lesson: Don't acquire based on bubble valuations. Disruption risk was ignored.
2. Microsoft - Nokia Devices (2014)
$7.2B → $7.6B Write-offWhat happened: Microsoft acquired Nokia's phone division to compete with iPhone and Android. Steve Ballmer's final major acquisition before retiring as CEO.
The fallout: 18,000 layoffs. Windows Phone discontinued. Entire purchase price written off plus additional costs.
Lesson: Platform ecosystems have winner-take-all dynamics. Third place rarely survives.
3. Microsoft - aQuantive (2007)
$6.3B → Full Write-offWhat happened: Microsoft acquired ad-tech company aQuantive to compete with Google's DoubleClick acquisition. The deal was rushed and overpriced.
The fallout: $6.2 billion write-down in 2012 - one of the largest in tech history at the time.
Lesson: Buying technology doesn't guarantee you can compete in an established market.
4. HP - Autonomy (2011)
$11.1B → $8.8B Write-offWhat happened: HP acquired British software company Autonomy for $11.1 billion. HP later claimed Autonomy had committed accounting fraud.
The fallout: $8.8 billion write-down. Years of litigation. Criminal charges against Autonomy's founder.
Lesson: Due diligence failures can be catastrophic. Verify all financial claims.
5. Google - Motorola Mobility (2012)
$12.5B → Sold for $2.9BWhat happened: Google acquired Motorola primarily for its patent portfolio to defend Android against Apple lawsuits.
The fallout: Sold to Lenovo for $2.9 billion in 2014. Google kept the patents but lost ~$10 billion on the hardware business.
Lesson: Patent defense is expensive. Hardware is hard for software companies.
More Failed Acquisitions
| Deal | Year | Price | Write-Down | Problem |
|---|---|---|---|---|
| Yahoo - Tumblr | 2013 | $1.1B | $230M sale | Failed to monetize |
| Yahoo - Broadcast.com | 1999 | $5.7B | Total loss | Bubble acquisition |
| eBay - Skype | 2005 | $2.6B | $1.4B write-down | No synergy |
| News Corp - MySpace | 2005 | $580M | Sold for $35M | Lost to Facebook |
| Sprint - Nextel | 2005 | $35B | $29.7B write-down | Incompatible networks |
| Quaker - Snapple | 1994 | $1.7B | Sold for $300M | Culture clash |
| Daimler - Chrysler | 1998 | $37B | Sold for $7.4B | "Merger of equals" lie |
| Bank of America - Countrywide | 2008 | $4B | $40B+ in losses | Mortgage crisis |
| Cisco - Flip Video | 2009 | $590M | Shut down 2011 | Smartphone disruption |
| Microsoft - Danger | 2008 | $500M | Kin phones failed | Product killed quickly |
Why Acquisitions Fail
1. Overpaying (Valuation Errors)
The most common failure mode. Acquirers get caught up in competitive bidding or bubble valuations and pay prices that can never be justified by future cash flows. AOL-Time Warner and Yahoo-Broadcast.com are prime examples.
2. Integration Failures
Even good deals can be destroyed by poor integration. Culture clashes, technology incompatibilities, and executive departures can undermine the strategic rationale. HP-Autonomy and Sprint-Nextel suffered from integration disasters.
3. Strategic Misalignment
Some acquisitions simply don't make strategic sense. eBay-Skype had no clear synergy - why would an auction site need a video calling company? These "diversification" deals often fail.
4. Market Disruption
The target's market can be disrupted before value is extracted. Microsoft-Nokia failed because smartphones disrupted the feature phone market. News Corp-MySpace lost to Facebook.
5. Due Diligence Failures
Sometimes acquirers simply don't verify claims. HP-Autonomy involved alleged accounting fraud that HP claims it didn't catch. Proper due diligence might have avoided an $8.8 billion write-down.
The M&A Success Rate
Studies suggest that 70-90% of acquisitions fail to create the expected value. McKinsey found that only 23% of acquisitions earn their cost of capital. The odds are stacked against acquirers.
Warning Signs of a Bad Deal
- Premium over 40%: Higher premiums rarely pay off
- "Strategic" justification: Vague synergies often don't materialize
- Competitive bidding: Winner's curse is real
- CEO ego: Empire-building destroys value
- Rushed timeline: Poor due diligence follows
- "Merger of equals": Usually a lie - one company dominates
Frequently Asked Questions
What is the worst acquisition in tech history?
The AOL-Time Warner merger in 2000 is widely considered the worst deal in corporate history. The $164 billion deal resulted in a $99 billion write-down and destroyed massive shareholder value. AOL was eventually spun off for a fraction of its original valuation.
Why do so many acquisitions fail?
Acquisitions fail due to overpayment, integration difficulties, culture clashes, strategic misalignment, and market disruption. Studies show 70-90% of acquisitions fail to create expected value. The complexity of combining two organizations is consistently underestimated.
What happened to Microsoft's Nokia acquisition?
Microsoft acquired Nokia's phone division for $7.2 billion in 2014, then wrote off $7.6 billion and laid off 18,000 employees. Windows Phone was discontinued in 2017. The deal failed because the smartphone market became a duopoly between iOS and Android.
Did Google lose money on Motorola?
Yes, Google acquired Motorola Mobility for $12.5 billion in 2012 and sold it to Lenovo for $2.9 billion in 2014. Google kept Motorola's patents, which was the primary motivation, but lost approximately $10 billion on the hardware business.
What makes an acquisition successful?
Successful acquisitions typically have clear strategic rationale, reasonable valuations, thorough due diligence, cultural compatibility, and strong integration planning. The best acquisitions often involve the acquirer's core business rather than diversification plays.
What percentage of M&A deals fail?
Research suggests 70-90% of acquisitions fail to meet expectations. McKinsey found only 23% earn their cost of capital. Harvard Business Review reports failure rates between 70-90% depending on how success is measured.