Case Study Of Facebook And Whatsapp-Acquisition

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Facebook and WhatsApp- Acquisition

On February 19, 2014, Facebook Inc. announced it is acquiring WhatsApp Inc. for $19 billion. Facebook, which was advised by Allen & Co, would pay $4 billion in cash, $12 billion in Facebook shares and $3 billion in restricted stock units to be granted to WhatsApp founders and employees that were to vest over four years subsequent to closing. WhatsApp Co-founder and CEO Jan Koum would join Facebook’s Board of Directors and WhatsApp would continue to remain autonomous and operate independently.

This transaction is the second biggest purchase of a company backed by venture capitalists (Exhibit 1). The $19 billion price tag is definitely aggressive; with many Wall Street analysts questioning the rationale behind
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It not only received funds and resources to develop its messaging technology but also freedom to run its business autonomously. Zuckerberg realizes that giving an acquisition independence is critical, he reiterated many times “WhatsApp is going to operate independently (....) We want to do this the same way we acquired Instagram.” When a company is looking for growth in new markets and finds a team with the right skills to understand the trends, it is independence rather than integration that makes the most sense organizationally.

Previous Acquisitions:
Once Facebook got up and running, Mark Zuckerberg had the vision and the tactical timing to use the momentum and keep the company thriving. Facebook, rather than having alliances or partnerships, has acquired 42 companies since its inception. Facebook’s acquisition strategy mainly focuses in the 3 areas: the procurement of new talent, acquisition of new technologies and buying out the competition.

In 2007, Facebook made its first acquisition of Parakey, a web operating system that easily transfers images, videos and writings to the web, for an undisclosed amount. Facebook wanted to get into photo upload, making Parakey a natural pick for a growing social network’s infrastructure. Facebook integrated Parakey’s technology into its mobile application and welcomed aboard the company’s

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