Facebook and Whatsapp Essay

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Internet research a publicly traded company United States undergone a merger acquisition (3) years. Take note circumstances surrounding merger acquisition. Write a (4-6) page paper: 1. Examine circumstances resulted merger acquisition selected company.

In February 2014, Facebook announced the conclusion of a deal to purchase leading messaging service WhatsApp, in a deal worth $19 billion, with $4 billion in cash (CNBC, 2014). The deal is considered one of the biggest in the IT industry, rivaling the acquisition of Compaq by HP, for example. It is also Facebook's biggest acquisition to date. Given the price of the acquisition and the fact that the acquired company is relatively new (it has been operational for about 5 years) and employs only around 50 people (Panzarino, 2013), questions about the motivation behind the deal are obvious.

There are several reasons that motivated the acquisition. First, as Hartung (2014) pointed out, success on the market is closely linked to maintaining relevancy. What this means is that a company needs to continuously stay in touch with the changes and developments on the market, particularly in terms of customer preference. It needs to innovate and propose new service to match these customer requirements. Sometimes, it cannot do this exclusively internally.

For example, Facebook realized the need to transform its social networking platform and make it more adapted to mobile devices, as the market required. This also meant creating instant messaging services, which it did, but not as successfully as WhatsApp. It made more sense to acquire a company that was already established in this market and that had a large number of consumers.

This links well to the second reason behind the merger: what Facebook acquired. Other than a relatively low number of employees (the price paid came to $550 million per engineer, as Panzarino (2013) showed)), it brought 350 million established users and, even more importantly, an international presence, helping Facebook reach into the European market, as well as into emerging markets (Constine, 2014).

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Furthermore, WhatsApp's founder and CEO, Jan Koum, will join the board of directors at Facebook, bringing along his expertise and knowledge.

While it is too difficult to assess the effects straightaway, since the conclusion of the deal is so recent, one can perfectly discuss and understand the positive effects of the deal, particularly by looking at the reasons behind the deal, as previously discussed. First of all, Facebook, through WhatsApp, will increase its presence in the instant messaging market of developing countries, as well as on the European market.

Constine (2014) draws a map of the world, with the type of mobile messaging used in different regions. It clearly shows a competitive advantage for WhatsApp, as compared to the Facebook messaging application, in many European countries. For example, the percentage of WhatsApp users, as compared to the Facebook messaging service, is 31 to 15% in Ireland, 83 to 12% in the Netherlands and 84 to 31% in Germany. After the acquisition, these figures will be added together, so Facebook, through WhatsApp and its own service, will clearly dominate the European market.

This is also the case with some of the large developing markets, such as Brazil or China. In China, for example, an obvious emerging and growing market, 11% use WhatsApp, while the Facebook messaging service has a 2% rate. In Brazil, the score is 71 to 34% in WhatsApp's favor. Again, in all these markets, the figures will now be added in Facebook's favor. It is important to also mention that WhatsApp adds about a million new users a day, which gains relevance in markets that still have a large potential to develop.

So, the first positive effect is the increase in the number of users. The second positive effect is derived from….....

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