The ink is still wet on Verizon Communications Inc.‘s (NYSE:VZ) new deal to acquire Yahoo! Inc. (NASDAQ:YHOO) for $4.8 billion. Unfortunately, it will probably be several years before VZ investors can tell whether or not $4.8 billion was a good price.
Huge buyouts like this one are always a big risk, but the tech sector in particular has a storied history of terrible deals and mind-boggling missed M&A opportunities. In fact, YHOO has been involved in more than its fair share.
Here’s a look at 5 of the biggest M&A blunders in the history of tech.
Yahoo Rejected $44.6 Billion Bid by Microsoft (2008)
This is about as simple of a math inequality as you can find:
$44.6 billion > $4.8 billion
That’s all it takes to see just how much of an opportunity YHOO management missed back in 2008 when the company rejected an offer from Microsoft Corporation (NASDAQ:MSFT) because co-founder Jerry Yang felt it was too low. Eight years later, YHOO sold for a little more than one-tenth that amount.
Yahoo Passed on Buying Google for $1 Million (1998)
I really hate to pick on YHOO, but it’s just so easy. As the story goes, Larry Page and Sergei Brin offered to sell the search business that later morphed into the global juggernaut Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) to YHOO for $1 million in 1998. Instead, YHOO wanted to focus on its own patented page-rank system.
Deals this good usually only come around once in a lifetime. Incredibly, YHOO got a second chance to buy Google in 2002, this time for $5 billion, but management determined the price tag was simply too high. Today, GOOGL’s market cap stands at over $560 billion.
Microsoft Bought Nokia’s Mobile Division for $7.9 Billion (2013)
MSFT has done a great many things very well, but Windows Phone is not one of them. The company’s dreams of competing with Apple Inc. (NASDAQ:AAPL) and GOOGL in the smartphone market seemed so bright just a few years ago. Now, however, those dreams are gone, along with most of Nokia and the $7.9 billion MSFT paid for it.
AOL Bought Time Warner for $165 Billion (2001)
Forget the tech sector. The AOL/TWX debacle could be the worst M&A deal in history. By 2002, after the Dot Com bubble had burst, the merger of AOL, Inc. (NYSE:AOL) and Time Warner Inc (NYSE:TWX) resulted in a record loss of $99 billion. Seven years later, the two companies decided to finally throw in the towel on the failed union. Last year, VZ bought AOL for $4.4 billion.
Viacom Passed on $2 Billion Facebook Buyout (2006)
For some reason, the missed opportunities seem so much more painful than the stupid buys. Viacom, Inc. (NASDAQ:VIA) made a $1.5 billion bid for Facebook Inc (NASDAQ:FB) back in 2006, but decided that Mark Zuckerberg’s $2 billion price tag was too steep. Of course, a decade later, FB is now valued at $351 billion.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.