top of page

Twilight of the Titans: An Analysis of the Dark Dance of Derailed Mergers & Acquisitions

Updated: Feb 9

by Aaditya Bajpai , Shreya Bajpai *


The proclivity of the colossal corporate titans to merge with the upstart businesses or to acquire them, is symptomatic of their acumen in spotting fledging development prospects and laying the groundwork for a complex mosaic of strategic integration that would usher an epoch of economic ascendancy.

Such corporate leviathans are able to establish themselves as even stronger and with the same arrow they also protect dying firms to stay intact in the market. Companies may enhance their market share, diversify their investment portfolios, expand into new areas, and improve their financial results by purchasing businesses and assets at liquidation rates.

However, such mergers and acquisitions (M&A) are not only restricted to the bigger fishes to take advantage of, but smaller fishes in the market too willingly go in for mergers in order to save a place in market standing. An example of the same could be taken from the recent acquisition of Switzerland’s Credit Suisse Bank by its long-standing rival, which is also Switzerland’s largest bank, i.e., UBS. Suisse was created almost 160 years ago and was also a national pride for the Swiss people, but eventually due to being exposed to a financial crisis, they had to be acquired by UBS to avoid any economic meltdown. However, the part left unnarrated is the scenario when such mergers fall apart. The causes, consequences and ramifications of such failures of mergers & acquisitions need deliberation so that such fallouts may be avoided.


The Fallen Kingdom: An Insight into the Causes Leading to the Failure of M&A

The failure percentage for M&A deals is estimated to be between 70% and 90% according to the Harvard Business Review. In a merger transaction, most often a certain factor is left unattended by the people involved, i.e., the reason behind the need to acquire the target company. Furthermore, instead of going into the depth of the figures, analysis is drawn on the basis of the assumptions made by the acquiring companies about their potential financial position in order to justify the said acquisition. This leads to a lack of understanding of the pros and cons of the target company and hence a potential fallout in the merger proceedings.

A major example of this could be taken from the Google and Motorola 2012 fallout. The backdrop here was that Google thought of Motorola to be a company from which Google can produce good quality mobile phones, and Google being a dominant force in the market already, would allow them to reach heights. However, the said aim of Google wasn’t so well reached because the new handsets of Google weren’t as up to the mark in the market, and Google had to finally resort to getting into a contract with other companies like Samsung and LG to develop its Nexus Handsets. As a result of which, in 2012, Google divested Motorola for just USD 2.9 Billion, which estimated a loss of almost USD 10 Billion. Along similar lines, another mistake was made, just a year later, when Microsoft acquired Nokia, with the logic that in order to create handsets, acquire an already existing handset company. This also didn’t work out well, for Nokia derailed in keeping up with the technological advancements, and hence by the end of 2015, Microsoft had to write off USD 7.6 Billion and laid off 15000 Nokia Employees.

The lack of a proper vision and the failure to comprehend the dynamics of the merger or takeover are the root causes of plenty of M&A failures. A major example of the same is eBay’s acquisition of Skype. The plan behind the acquisition was that the buyers and sellers on eBay would be able to chat with one another, which would theoretically improve the site’s efficiency and lead to a greater inflow of revenue. However, this strategy neglected to account for the reality that most people would rather simply use email to communicate with complete strangers about business matters. Just four years after the purchase, eBay realized there was no genuine purpose for Skype and sold off 65% of the company for just $1.9 billion. Similarly, the deal between Mattel and the Learning Company in 1998, which was basically viewed as a deal of “Barbie meets Carmen Sandiego”, soon turned out to be a major disappointment for Mattel, because Mattel thought of upgrading from traditional toys to video games, and assumed that the Learning Company would provide them with the platform of developing on that dream. However, in a span of just two years, Mattel had to sell the Learning Company for about 1/10th of what it was bought for, with no strategy, products or anything to show on the plate. Here the quote by Benjamin Franklin fits perfectly, i.e., “If you fail to plan, you are planning to fail”.


The Bankruptcy Avoidance Rationale & the Derailment Effect: The Infinity-MEI Merger Case Study

Firms on their deathbed, almost facing bankruptcy, develop a tendency of merging with a financially stable firm in hopes that it would help them avoid bankruptcy. This model of bankruptcy motive for merger was recognized as early as 1930 when in the case of International Shoe v. The Federal Trade Commission, the US Supreme Court held that a firm could acquire another firm which is in a dying state, if no other competitor steps in. This rationale came to be subsequently known as the “Failing Company Doctrine” and it emphasized that the damage to competition from such acquisitions would usually be offset by the detriment to the local community from business failures.

It was on February 23, 2023 when MEI Pharma, a San-Diego based pharmaceutical company and Infinity Pharmaceuticals, a US Based pharmaceutical company, announced a definitive merger agreement. The deal called for Infinity to become a wholly owned subsidiary of MEI, with the latter’s stockholders acquiring around 58% of the firm, while Infinity’s stockholders will own the remaining. However, the said merger saga has been a roller-coaster ride for Infinity Pharmaceuticals. The reason behind the same is that Infinity Pharma has been suffering from a deficit of revenue from the sale of its products in the market and that it has also estimated to continue incurring such losses for the foreseeable future, so applying the bankruptcy avoidance rationale, this merger holds utmost importance for Infinity. However, ever since the same was announced there has been constant tension that the merger shall fall apart. The core reason behind the same was the reports that MEI has officially received an “unsolicited proposal” from a group led by investment companies Anson Advisors and Cable Car Capital on May 23, 2023.

The response from MEI for the said proposal was that their department will review the same, however, an acceptance of the same would have been the death blow to Infinity Pharmaceuticals because, they had already stated that this long-planned merger is their last resort to avoid going from riches to rags, i.e., avoid bankruptcy. However, good news came knocking on the doors of Infinity very soon on June 1, 2023 when MEI Pharma announced that they are turning down the said proposal and that they shall move forward with the proposed merger with Infinity.



The general image when a company takes over or merges with another might seem historic and glorifying on one hand, however, the dark dance which it does when the said merger or takeover fails is something horrifying for the parties involved, both on the market standing and economic front. An example of the same can be taken from the collapse of the buying of Simon & Schuster by Penguin Random House. The saga had this climax after going through a two-year journey, while also involving hefty economic losses. The said fallout affected Penguin House, the largest publishing house, in way that it stopped them from growing even larger in the US market.

M&A failures are hefty and cause extreme damages to the parties involved, and the major reasons are already cited above. Even the bankruptcy avoidance rationale is of little help to the parties because any company being on the verge of bankruptcy can only be further harassed on the grounds of having a merger or a takeover, for just like Infinity’s case, any day a better offer might come for the superior company and that shall blow everything off for the company on its deathbed. In the case Penguin Random House as well, Penguin revealed that they were under severe pressure because of an economic demotion in the market, and this deal was their way of making up for it, but it failed and the rest is history. Hence, to ensure that the M&As are successful, it is necessary that companies prospecting a merger or an acquisition proceed with the same only after being ascertained and educated about all the facets of it.

*Aaditya Bajpai is a fourth year student and Shreya Bajpai is a fifth year student at Maharashtra National Law University, Nagpur at the time of publication of this blog


bottom of page