Facebook's Acquisition of Whatsapp Term Paper

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Mergers and Acquisition

Mergers And Acquistion

Mergers and acquisition are aspects that managers of various companies use in order to grow rapidly or increase their market share in a given industry. It is often characterized by dividing, buying, selling, and combining similar entities and different companies that can exist as joint enterprises. The main aim of mergers and acquisitions is to restructure organizations with the purpose of providing positive value and growth (DePamphilis, 2012). This study endeavors to examine the circumstances that resulted in the acquisition of WhatsApp by Facebook. Facebook is a publicly traded company whose shares began trading in the NYSE since last year. Various advantages and disadvantages often accompany the process of merging and acquisition as seen from this example. This report will also identify the organizational structure that has resulted from the acquisition and the possible changes in the companies' human resource practices.

Mergers are differentiated from acquisition partly from the size of the company and financing. Payment by cash is usually termed as acquisitions because the target comes under the indirect control of the bidder's shareholders while the shareholders of the target company. Stock payment is mainly used in mergers. The company's stocks are given in a ratio that is directly proportion to the value of the latter. There are advantages that arise from mergers and acquisitions. These include improved EPS and profitability, higher competitiveness, increased market share, lower costs of production and operation, increased industry positioning and know how. There are also challenges that are associated with mergers and acquisitions of companies. These challenges include intangible costs, potential devaluation of equity, legal expenses and high costs of the acquisition (Ray, 2011).

Circumstances

Competition in the social media industry is growing on a daily basis. Leading participants in the industry like Facebook, Twitter, and Google+ have been adopting various strategies aimed at fostering their sustainability and profitability. Facebook founder, Zuckerberg observed WhatsApp growth in the recent past and was pleased with its prospects. It is shown that talks about the acquisition as early as last year, but the deal was closed in mid-February.

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Facebook acquired WhatsApp, a company with an estimate of $300M revenues and 55 workers, for $19 billion (Ember, 2014). In today's global market, successful organizations sell for much lower valuations. A termination fee is attached to the deal costing Facebook $1 billion in shares and $1 billion in cash. Facebook has declared that WhatsApp will retain its brand and continue operating independently. However, Facebook's organizational structure will change because WhatsApp's CEO and co-founder Jan Koum will be on the Facebook board. The contract is subject to regulatory approvals. In a conference, Mark Zuckerberg referred WhatsApp as an extremely high-quality product with rapid growth and incredibly strong engagement (MacMillan & Rusli, 2014).

One advantage is that it will increase the company's market share. Facebook noted that the percentage of WhatsApp's SMS system was significant globally. It also noted that WhatsApp is adding one million users a day. In the future, it might reach one billion people. Jan Koum stated that WhatsApp rapid growth and high user engagements are driven by instantaneous, simple, and powerful messaging capabilities (Ember, 2014).

Effect on HRM practice

WhatsApp's autonomy and independence are not debatable just like its core principles and vision. The main mission of the merger is to make the world more connected and open. This will happen by building services helping customers to share any content with friends. WhatsApp will ensure the achievement of this mission by the continual development of services that will benefit individuals all over the world. The merger just occurred in less than a month. Human resource alignment and practices at WhatsApp have not been felt after the acquisition. In the agreement made, the employee absorption process would take up to three years as per their agreements. This informed by the fact that immediate disruptions of employees may severely damage the performance of the company. This will significantly result in loss making instead of profits (Ferenczy, 2013).

Facebook has always wished to be the leading social media platform ahead of Twitter….....

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