Twitter sale and potential acquirers: Salesforce, Microsoft, Google, Disney, Verizon

twitter“Why Twitter?”, “Who will buy?”, “Why will they buy?” These are the questions that engulfs my thinking mind when I dwell into this deal. So, today, I’m going to present my thoughts on this possible transaction and how the potential acquirers are positioned in relation to this sale transaction. I’ll try to simplify my views under the respective headings and present my opinion to my Readers in an easy-to-comprehend manner. I welcome Reader’s thoughts and views on my article.

What makes Twitter so attractive?

  1. Twitter has an active user base of over 300 million users and an annual revenue of about $2 billion. Even though it’s losing about US$ 125 million every quarter (although some attribute it to stock-based compensation), the potential acquisition candidate holds about US$ 3 billion in cash and short-term securities in hand, and an accumulated deficit of US$ 2 billion in its Balance Sheet.
  2. Twitter, which originally started out as a micro-blogging site, evolved into a social platform for discussing opinions, news and live events. Its video ads through data streaming are widely expected to be the primary source of revenue in the future. Recently, the company also inked deals with several companies for live-stream events on its platform, including 120 Sports, Bloomberg TV and the four major sports leagues in the U.S. In other words, it’s an attractive investment because of its data, user base and influence in politics, culture and the media.
  3. Verto Analytics conducted a survey in the US on 20,000 internet users and found that Twitter is the sixth largest digital publisher in the US from montly active users perspective, that reaches 89% of its audience in the nation.

[Click to continue reading]


Top 5 Issues in M&A Transactions

Image result for merger acquisitionDuring an M&A transaction, many issues populate that need immediate attention. In this article, I’m going to highlight the top 5 burning issues and the challenges thereof, that both the parties face while negotiating a transaction.

1. Structure of the deal

There are 3 ways to structure a transaction: (i) stock sale, (ii) asset sale and (iii) merger. The acquirer and the target have competing interests with each of 3 alternatives. Hence, it’s important to recognize and address material issues while negotiating a deal structure. Highlighted below are 4 areas that needs to be considered when structuring the deal

i.    Liability: Unless contractually negotiated otherwise, in a stock sale, upon the consummation of transaction, the target’s liabilities are transferred to the acquirer by operation of law. Similarly, in a merger, the surviving entity assumes all liabilities of the merged entity. But, in an asset sale, the acquirer picks and chooses and assumes only the designated liabilities; the non-designated ones remain with the target

ii.    Contracts: Target’s existing contracts might sometimes prohibit assignment. In that case, a pre-closing consent to assignment must be obtained. However, for a stock purchase or merger, no such requirement exists unless the contracts state otherwise; the prohibitions get activated upon a change of control or by operation of law

[Click to continue reading]

Why Oracle Should Buy Salesforce

CEOWith news, rumors, speculations floating around the potential acquisition in the cloud market, shareholders of are enjoying the surge in their share price, especially after Bloomberg reported that it could be a potential cloud computing acquisition target. With Salesforce market capitalization standing at $47 billion, its acquisition, if ever happens, will be one of the biggest in the technology industry. Such a deal, as per my view, can be financed only by a few Fortune 100 players, and when I say “few Fortune 100 players”, I’m referring to Microsoft, Oracle and IBM (not necessarily in this order of precedence).

In this article, I’m presenting my thoughts on “Why Oracle Should Buy Salesforce” and discuss some of the key points while the business leaders work on this deal with the Bankers. You may also want to read my previous articles on Information Technology Industry and Key Metrics here, where I highlighted the key parameters pertaining to this industry.

(1) Oracle aspires to go big in cloud computing

This is the very first thought that comes to my mind when I think of this deal. Since Oracle acquired Sun Microsystems for $7.4 billion on January 27, 2010 to compete with and beat IBM’s high-end systems and SAP applications, its cloud offerings, particularly Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) has enhanced. Salesforce acquisition will help Oracle:

  • uplift its cloud sales revenue from the current $2 billion to $5-6 billion
  • help improve its market share. According to Gartner, the combination would make Oracle the largest player in the CRM market
  • enhance its customer base, and
  • complete its SaaS Suite

[Click to continue reading]