General Electric’s Legacy of Mergers and Acquisitions

Since its founding in 1892, General Electric (GE) has long been an icon of American innovation and industrial prowess. Throughout its history, the company has expanded, diversified, and refocused its businesses through mergers and acquisitions (M&A). Once the most valuable company in the world, GE’s success story is also a cautionary tale, highlighting the importance of strategic focus, timing, and adaptability in a rapidly changing marketplace. Below, we take a deep dive into GE’s most significant M&A activities, analyzing both the triumphs and the challenges that have shaped its journey.

Historical M&A Overview: The Foundation Years to Modern Times

From the early 20th century to today, GE’s acquisitions have spanned a broad range of industries, from aviation and energy to finance and media. Each acquisition has reflected GE’s desire to lead in its chosen sectors, though not all deals have panned out as expected. Here’s a closer look at some of GE’s most important acquisitions, and a summary of their outcomes.

Key Acquisitions and Divestitures

1. RCA Corporation (1985)

Deal Value: $6.3 billion
Overview: GE’s acquisition of RCA Corporation was one of the largest deals of the 1980s. RCA was a powerhouse in electronics and media, including NBC.
Outcome: While the deal initially strengthened GE’s position in media, RCA’s divestiture became inevitable. By 2004, GE had sold most of RCA’s businesses, including NBCUniversal (to Comcast), marking this as a moderately successful investment with limited lasting impact on GE’s strategy.

2. Kidder, Peabody & Co. (1986)

Deal Value: $600 million
Overview: To enter the financial services sector, GE acquired the storied but troubled Wall Street firm Kidder Peabody.
Outcome: This acquisition proved disastrous. Kidder Peabody faced scandal and trading losses that hurt GE’s reputation. In 1994, GE sold the firm, underscoring the risks of entering financial services without sufficient operational oversight.

3. Amersham plc (2003)

Deal Value: $9.5 billion
Overview: GE acquired Amersham, a British medical diagnostics and biotechnology firm, to strengthen its position in healthcare technologies.
Outcome: This acquisition was a success and laid the groundwork for GE Healthcare, a valuable GE segment that grew consistently. GE Healthcare remains one of the company’s strongest divisions, bolstered by this acquisition.

4. Enron Wind (2002)

Deal Value: $325 million
Overview: GE bought Enron’s wind business following Enron’s collapse. At the time, wind power was a small segment in the global energy mix.
Outcome: This acquisition was highly successful and paved the way for GE Renewable Energy. It allowed GE to be an early mover in the renewable energy space, and today, GE Renewable Energy is a global leader in wind turbine manufacturing.

5. Alstom Power and Grid (2015)

Deal Value: $10.6 billion
Overview: GE’s acquisition of Alstom’s power and grid business was intended to expand its footprint in Europe and strengthen its power-generation capabilities.
Outcome: Unfortunately, this acquisition came at a challenging time as global demand for fossil-fuel-based power dropped. The integration proved complex, and GE incurred significant losses, making this one of the most financially challenging deals in GE’s history.

6. Baker Hughes (2017)

Deal Value: $7.4 billion for a 62.5% stake
Overview: GE merged its oil and gas business with Baker Hughes to create Baker Hughes, a GE company (BHGE), aiming to solidify its presence in oilfield services.
Outcome: This deal coincided with an oil market downturn, which limited its profitability. In 2019, GE began selling its stake in BHGE, ultimately fully divesting by 2021. This acquisition highlighted the risks of investing in volatile sectors.

Strategic Shifts and Decision-Making

GE’s M&A strategy has been guided by a combination of opportunity, market positioning, and a belief in the transformative power of scale. Yet, not all deals proved viable, with both internal and external factors contributing to successes and challenges.

Diversification: Balancing Innovation with Focus

For decades, GE pursued acquisitions in diverse industries to balance risks and capture growth across sectors. The RCA and Kidder Peabody acquisitions, for example, allowed GE to extend beyond its industrial roots, but ultimately showed the limitations of expanding too far from its core competencies.

Emphasis on High-Growth Sectors

In the early 2000s, GE began a targeted approach, focusing on healthcare, aviation, and energy—sectors with strong long-term growth potential. The acquisition of Amersham for medical diagnostics and Enron’s wind business exemplify GE’s pivot towards sectors aligned with global trends like aging populations and renewable energy.

Refocus on Core Businesses: Scaling Down to Strengthen

After 2017, under new CEO leadership, GE undertook significant divestitures, selling off portions of its financial and oil and gas divisions to focus on aviation, healthcare, and renewable energy. This approach has allowed GE to reduce debt and concentrate resources on the sectors where it has maintained strong market positions.

Successes and Missteps: Lessons from GE’s M&A Journey

Successes:

Enron Wind: GE’s acquisition of Enron’s wind business has positioned it as a leader in renewable energy, a prescient move as the world pivots towards sustainable energy.
Amersham: This acquisition allowed GE Healthcare to evolve into a major player in diagnostics and life sciences.

Missteps:

Alstom and Baker Hughes: Both acquisitions suffered from timing and external factors, with the Alstom deal aligning poorly with shifts in the energy sector and Baker Hughes struggling amid a prolonged oil downturn.
Kidder Peabody: GE’s foray into financial services backfired, as the complexities of the finance world posed significant challenges.

The Road Ahead: A New Era of Focused Growth

Under the recent leadership of CEO Larry Culp, GE has taken steps to recalibrate and streamline its operations. The decision to split GE into three independent public companies—focusing on aviation, healthcare, and energy—represents a significant strategic shift. This breakup is designed to allow each segment to operate independently and tailor its growth strategies without the burden of unrelated divisions.

Conclusion

GE’s M&A history offers valuable lessons on the importance of strategic alignment, market timing, and adaptability. With its recent restructuring, GE is well-positioned to capitalize on emerging trends in aviation, healthcare, and renewable energy, while remaining nimble in a rapidly evolving landscape. This leaner, more focused GE may just reclaim the innovative spirit that marked its early years and solidify its standing as a forward-looking industrial leader.