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Mergers and Acquisitions: Errors Made by Companies Both Large and Small

While many corporate deals look great on paper, far too many CEOs keep giving the “green light” to serious blunders. Even corporate giants like Bank of America keep making their share of mistakes, as was clearly evident back when BOA acquired Countrywide Financial.

Yet other lower-profile errors are even more common, including eBay’s purchase of Skype and Popeye’s Famous Fried Chicken’s acquisition of Church’s Fried Chicken.                                

The following information may makes you wonder if the biggest problem in corporate board rooms is the tendency of dissenters to remain silent because they’re afraid of losing their jobs.

Some of the most enduring mistakes are noted toward the end of the article – those made by Bank of America that refuse to fade away -- and may be keeping this financial institution from once again becoming the largest holder of banking assets in this country.

Why Popeye’s, BOA, and eBay Should Have Looked More Closely Before Leaping

  • Popeye’s Famous Fried Chicken. The late Al Copeland was clearly determined to make his bid for Church’s Fried Chicken, despite signs that the American economy wasn’t very stable. However, his lack of foresight was matched by that of the Wall Street firms that loaned him the entire $392 million needed to buy Church’s. While there was a plan of sorts – “to sell off redundant restaurants and issue junk bonds to cut the interest costs” – it clearly failed. Copeland’s company defaulted on $391 million of debt and he wound up losing both Popeye’s and Church’s. However, he was careful to hold on to his rights to the company’s special spice formula. Although he has now passed away (back in 2008), Popeye’s current owners will be paying Copeland’s family for its use until 2025;

  • eBay’s purchase of Skype. Meg Whitman is obviously a bright and formidable businesswoman. However, her decision in 2005 as eBay’s CEO to pay $2.6 billion for Skype was seriously questioned by many. (As once source now puts it, “eBay has since admitted it made a mistake and [had to write] off a lot of the value of its investment to placate shareholders.”) Fortunately, Skype’s rather doubtful future was eventually rescued when Microsoft decided in 2011 to buy the company for $8.5 billion. Although
    the initial purchase fell flat for the most part, Skype is said to be doing much better now that it’s under Microsoft’s control;

  • BOA’s purchase of Countrywide Financial.  This corporate decision has proven to be one of the most costly in recent memory. After Bank of America paid $4 billion to buy Countrywide Financial in 2008, the banking giant hoped to then expand its own mortgage revenues. As it turns out, BOA has lost somewhere between about $40 and $50 billion due to this investment. Among other problems, Countrywide Financial (CF), has made numerous loans that it should never have even considered.  Also, there was widespread mishandling of paperwork and far too many cheap loans made to a number of politicians. Also, “mortgage securities [were] sold to investors who may not have understood the risks.”   Bank of America’s headaches from all of this continue to this day. According to a Wall Street Journal article published in July 2014, BOA has now agreed to pay $650 million to AIG to settle a lawsuit that alleged that Countrywide Financial, which BOA bought back in 2008, “misrepresented the quality of mortgage securities sold to investors.” It appears that a number of rather questionable transactions continue to haunt BOA.

To obtain help with handling all of your Georgia business planning needs, please contact the Law Offices of Shane Smith today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.


Shane Smith
Advocate for the Seriously Injured in Georgia