According to reports in Fierce Wireless and elsewhere, a strategic competitor to Sprint attempted to acquire Virgin Mobile USA shortly before Sprint announced its $483 million July acquisition of the prepaid provider, based on SEC filings. This behind the scenes bidding war no doubt inflated the final price paid for Virgin Mobile USA.
Mergers and acquisitions this past year, in a recessionary environment, have been significantly below the pace of those in past years as companies have hunkered down and cash and capital have remained lean. But now, with the recession seemingly to be in bottoming out, M&A’s are starting to occur as companies look for value and a chance to buy market share in lieu of natural growth, buying up struggling competitors or adjacent firms that could bring them more value at a faster pace.
Acquisitions in the current economic environment can also be seen as a way to grab more talent, consolidate it, and then jettison less desirable existing employees through the consolidation process (which is either beneficial or not, depending on the side of the fence you sit on). The Sprint acquisition was about gaining efficiencies and strengthening the brand. Virgin Mobile spokeswoman Jayne Wallace stated that the deal with Sprint provides maximum value to both Sprint and Virgin Mobile shareholders (the deal is still expected to close in Q4 or early next year).
Other recent M&A behavior can be seen in the recent acquisition of Marvel by Disney, which brought Marvels’s vast catalog of media into the Disney’s lair, and this weekend’s attempt by Kraft Foods to buy Cadbury (Cadbury declined over the weekend, and as of this morning, Kraft shares were down sharply, while Cadbury shares jumped up). I expect more action ahead in the fourth quarter, especially within the mobile, media, and consumer electronics segments as companies try to position themselves better for 2010 as market conditions are expected to improve next year. And one way to do that is to buy the weak, buy the complimentary, and buy the unique to catapult your share.