The Impact of the M&A Advisor Google/Motorola Mobility

In our Selling Out, Selling Up workshop, we talk about the many ways that a qualified M&A advisor will impact the acquisition of your company. Here are two data points from our own analysis that are borne out in the Google / Motorola Mobility deal.

 

  • Most firms are approached by some buyer; if the company is professionally marketed in a global search, only 25% of the time will that first bidder be the final purchaser.
  • If the first bidder is the eventual buyer in a professional process, then the deal is improved by an average of 48% liquidity due to the leverage of other offers.

It just so happens that the back story on Googles blockbuster acquisition of Motorola Mobility, described in the SEC filing and in the NY Times DealBook, is a great example. In this high profile deal involving two public companies, details are available that are confidential in the private to private deals that Corum typically advises.

 

With the assist of an advisor, the valuation of Motorola improved from $30 to $40 per share, a jump of more than $3B and 33% liquidity in just a few weeks. $40 is a 63% premium to the closing price of Motorola at the time. This deal was done with the first buyer and without benefit of multiple bidders or an auction process. The impact of the M&A advisor is clear in the short timeline of key events.

 

Early July - Just days after Google lost to a consortium led by Apple and Microsoft to purchase the Nortel patent portfolio, they reach out to Motorola Mobility to discuss the possible impact of and potential responses to the Nortel purchase.

Mid-July - Discussions between the two companies intensify and widen. The parties agree to a confidentiality agreement, as Google began due diligence on Motorola Mobilitys patent portfolio. The focus of discussions shifts to acquisition of the company.

July 28 - Google said it would consider a per share offer in the range of high $20s to low $30s.

Aug. 1 - Google issues a formal proposal at $30.

Aug. 1 - Motorola Mobility hires Qatalyst Partners and Centerview Partners to serve as financial advisers.

Aug. 5 - After meeting with Motorolas directors, Qatalyst contacted Google to reject the $30 offer and suggest that Google increase its proposal price to $43.50.

Aug. 9 - Google improves its offer to $40. Afterward, Motorola Mobilitys board considers seeking other buyers, but ultimately decides not to conduct a private or public auction and to negotiate with Google on a confidential basis.

Aug 15 - The $12.5B acquisition is announced

 

Most often the first buyer does not prevail and most deals dont move this fast. However, Google apparently felt the pressure to counter the Apple/Microsoft deal quickly and close the Motorola deal before competition emerged. They knew the impact that multiple bidders and a well-managed auction would have on their prospects of prevailing and the higher price theyd pay if they eventually prevailed in an auction process.

Posted by , Senior Vice President on 19 September 2011
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