Question

Examine several recent mergers and suggest the principal motives for merging in each case. Discuss three different mergers, and suggest the principal motives for merging in each case.

Answer 1

1) Salesforce ~ Tableau merger - A top cloud based CRM vendor, Salesforce.com, acquire the number-one business intelligence (BI) vendor, Tableau, in an all-stock deal, valued at $15.7 billion, a near 50% premium of Tableau's price of the stock at the time during June 2019.Now,, Salesforce will be positioned to play a greater role in driving digital transformation, enabling companies around the world to tap into data across their entire business and surface deeper insights to make smarter decisions, drive intelligent, connected customer experiences and accelerate innovation.

As with any large acquisition involving two enormous organizations, combining them could prove challenging, and the real test of this deal, once the dust has settled, will be how smoothly that transition happens and how well the companies can work together and become a single entity under the Salesforce umbrella.In theory, having Tableau gives Salesforce another broad path into larger and more expansive enterprise sales, but the success of the deal will really hinge on how well it folds Tableau into the Salesforce sales machine.

Joint customers of the two will see the least amount of change, at least initially, as San Francisco-based Salesforce plans to let Tableau continue operating independently from its existing Seattle headquarters.For those that resist the pressure to become joint customers, it is unlikely that Salesforce will invest much in keeping Tableau working with direct competitors. Users of Salesforce’s CRM platform have all subscribed to its software-as-a-service (SaaS) model, putting their data in the cloud — but the company is only beginning to respond to the demand for sophisticated tools to analyze that data. Enterprises are increasingly deploying Tableau Server in Amazon’s, Google’s or Microsoft’s clouds, and a growing number are adopting the SaaS version, Tableau Online.

2) Global Payments - TSYS merger -  Global Payments Inc. a leading worldwide provider of payments technology and software solutions, merged with TSYS, forming the premier pure play payments technology company with extensive scale and unmatched global reach. The combined company, Global Payments Inc., provides innovative payments and software solutions to approximately 3.5 million predominantly small to mid-sized merchant locations, services over 1,300 financial institutions across more than 100 countries and enables digital interactions with over 600 million cardholders globally.Under the terms of the agreement, TSYS shareholders will receive 0.8101 Global Payments Shares of TSYS common stock, representing an equity value of TSYS of about $21.5 billion. Global Payments shareholders will own 52% of the combined company, and TSYS shareholders will own 48% on a fully diluted basis.

All six of the big buyers and sellers — FIS, Worldpay, Fiserv, First Data, TSYS and Global Payments — face disintermediation by well-funded and smaller technology companies that are attractive to investors and have a reputation for moving faster.“TSYS and Global Payments are two of the last large relevant standing payment-only type companies,” said TSYS CEO Troy Woods, chairman of the combined company, in an interview. “It made sense to take both companies and find a way to do something together.” The deal will provide TSYS greater access to global markets as e-commerce and cross-border transactions become more important to merchant acquiring, an area where TSYS has room to grow.

The combined company will attempt to differentiate itself from the other large legacy companies with a heavy focus on payments-related tasks and merchant services, such as consumer solutions, reloadable payment products (such as TSYS’ Netspend business) and merchant acquiring.

3) Newmont~Goldcorp merger - Newmont Mining Corp. and Goldcorp Inc. have completed their merger to form Newmont Goldcorp Corp. creating the world's largest gold-mining company with a capacity of 6-7 billion ounces of gold mining per year. Officials have said the merger will be accretive to Newmont's net asset value per share by 27% and to the combined company's 2020 cash flow per share by 34%. They have also touted an expected $365 million in annual pre-tax synergies, supply-chain efficiencies and other improvements. Shareholders of both Newmont and Goldcorp voted earlier this month voted in favor of measures required for the merger to go ahead. The merger clears the way for Newmont's previously announced one-time special dividend of 88 cents per share to be paid on May 1 to Newmont shareholders of record as of April 17. This is meant to provide a benefit to Newmont shareholders from expected synergies as a result of a joint venture with Barrick Gold Corp. for the two companies' mines in Nevada. An unsuccessful development project, however, can quickly turn into a cash drain. Newmont Goldcorp's peer Barrick spent $5 billion to develop a gold mine in South America and never got a single ounce of gold out of it.

Newmont Goldcorp's status as the largest producer of gold and the owner of the largest portfolio of reserves and resources makes it a good bet for investors seeking exposure to gold. If gold enters a bull market, the value of its annual gold production and the value of its undeveloped reserve properties will rise driving the stock price up as well. However, Newmont Goldcorp is still not a sure thing for investors. But, large miners such as Newmont Goldcorp are much more likely to survive setbacks in development than smaller mining companies.