Facebook: Facebook is an online social networking service to connect people with friends and others who work, study and live around them.
Whatsapp: Whatsapp is a proprietar, cross-platform instant messaging subscription service for smartphones. In addition to text messaging, users can send each other images, video, and audio media messages as well as their location using integrated mapping features.
On Feburary 19th, Facebook founder Mark Zuckerberg make a full statement to announce that Facebook have agreed to acquire Whatsapp in a deal worth a total of $19bn in cash and shares.
From above table, Facebook have already merger 10 companies. However, Whatsapp is the largest merger case in Facebook acquisition history. It should be mentioned that Whatsapp acquisition is not the first over value merger case. There is another merger case on Facebook which is Facebook and Instagram merge in $1 bn on April 2012. At first, people thought that Facebook bought Instagram for its IPO. Moreover, the Instagram acquisition could be cared as another good case like Google merger Youtube. However, the slump on Facebook stock on May 2012 prove that those unseen profit technological corporations have high risk. From 1 billion photo quantity of Instagram on May 2012 and 0.4 billion every month active user of Whatsapp on December 2013, those two company seems to have high potential which could be a strong competitor of Facebook in the future. Therefore, those two merger cases are seems that Facebook is eliminating its predicting competitors by acquisition. Although Whatsapp have high potential, $ 19 bn of Whatsapp acquisition is too much. What benefit could bring from Whatsapp acquisition?
Are target firms poor performers?
As Facebook and Whatsapp are both on network social service, its active user is its value. There are 1 billion active users of Facebook on September 2012 and 90 million active users of Whatsapp on January 2013. That is to say, Facebook active user is much more than Whatsapp. According to Arnold (2008, p888), Whatsapp could increase its profitability from this acquisition.
Do the shareholders of acquires gain from mergers?
Although, as the influence of privacy problem, Facebook stock price is mainly increasing since 19th Feburary.
Do target shareholders gain from mergers?
In Facebook & Whatsapp acquisition, the biggest winner should be Sequoia Capita which is Whatsapp shareholder. As Whatsapp has been financing just 1 million and Facebook merger Whatsapp on $19 billion, it could be brief calculated that Sequoia Capita would gain $1.6 billion which is 200 times of it initial investment if Sequoia Capita hold 10% Whatsapp shares.
Do the employees gain?
According to Facebook(2014) statement, “the agreement also provides for an additional $3 billion in restricted stck units to be granted to Whatsapp’s founders and employees that will vest over four years subsequent to closing.” That is to say, early employees reported have 1 percent stakes, which yields each of them $160 million each.
Do the directors of the acquirer gain?
As Facebook & Whatsapp acquisition case is the biggest acquisition in network industry, Mark Zuckerberg would gain more reputation from that.
Do the directors of the target gain?
Whatsapp CEO Jan Koum owns a 45% equity stake, which makes him worth $6.8 billion while cofounder Brain Acton gets $3 billion for his 20 percent stake.
Do the financial innsitutions gain?
As Facebook & Whatsapp acquisition case is the biggest acquisition in network industry, both Facebook adviser (Allen & Co. And Weil, Gotshal & Manes) and Whatsapp adviser (Fenwick & West) could possible gain reputation from that.
Does society benefit from mergers?
As Facebook would connect with Whatsapp in the future, the progress of social service would fast as two corporation technology and resources would link together.
The popularization and importance of instant message would be paid more attention to. For example, Blackberry was increasing its stock price from $9.01 on Feb. 21st 2014 to $10.04 on Mar. 6th 2014 as its BBM could possible have high value under Whatsapp high acquisition consideration.
However, from the 3.09% Tencent stock price decreasing on 20th March 2014, another competitor of Facebook (Wechat) was threaten by this acquisition as Instagram has high utilization in emerging country in particular China and Facebook originally has not.
It should be mentioned that Facebook & Whatsapp acquisition has been challenged as this case is going against Whatsapp privacy protection regulation. Many user of Whatsapp are worried that their personal privacy would threaten by this acquisition. In addition, as Facebook is continued merger its competitors could have an effect on network social service mnopolization. Therefore, both Facebook and Whatsapp could be the winner of this acquisition without their users.
At last, although, the sum of acquisition is too much and network industry has high risk, comparing with the similar acquistion on Instagram, Instagram has a huge increasing progress and provides electric advertising business profit for facebook which may show a positive expect.
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