M&a - Facebook Acquires Instagram
One of the most recent notable M&A deals is “Facebook acquiring Instagram”. This acquisition is a critical move of Facebook due to the 2 main reasons: the deal size of $1 bn that Facebook spent for a startup app developer, of which $300 mn in cash and the remainder in Facebook Class B stock after the IPO and the financial effect the deal created just before Facebook IPO.
At the time of the acquisition, Facebook was a network of a billion users yet still struggling with monetizing. On the other hand, Instagram, a photo sharing app, could be viewed as a successful startup since it had had 30 mn users before the acquisition. This number shows an even stronger growth than Facebook’s if compared the same period of 6 quarters after launching business (Appendix). Part of this achievement came from the increase in number of smart devices. The strong growth of Instagram posed a threat to Facebook since one of the most common activities of Facebook users is sharing images. Instagram provided convenient tools and interactions for people to post and comment on images. In addition, users may choose to follow people who they admire, feel interested in or share the same interest. This actually created a trend for social networkers.
Facebook foresaw the threat from Instagram, especially the ability to be used on Iphone and Adroid phones so the firm decided to acquire Instagram. This acquisition will allow Facebook to gain user access through Instagram by giving Instagram users the option to register via Facebook accounts. Either users choose Facebook or Instagram to post their pictures, they still socialized within the network of Facebook. Another advantage of the deal is that Facebook may grab talented people of Instagram to improve its photo sharing as well as other potential features, especially on mobile devices. The new staff still works on developing Instagram and at the same time, finds out the best way to combine the advantages of Instagram and Facebook.
Financially,
At the time of the acquisition, Facebook was a network of a billion users yet still struggling with monetizing. On the other hand, Instagram, a photo sharing app, could be viewed as a successful startup since it had had 30 mn users before the acquisition. This number shows an even stronger growth than Facebook’s if compared the same period of 6 quarters after launching business (Appendix). Part of this achievement came from the increase in number of smart devices. The strong growth of Instagram posed a threat to Facebook since one of the most common activities of Facebook users is sharing images. Instagram provided convenient tools and interactions for people to post and comment on images. In addition, users may choose to follow people who they admire, feel interested in or share the same interest. This actually created a trend for social networkers.
Facebook foresaw the threat from Instagram, especially the ability to be used on Iphone and Adroid phones so the firm decided to acquire Instagram. This acquisition will allow Facebook to gain user access through Instagram by giving Instagram users the option to register via Facebook accounts. Either users choose Facebook or Instagram to post their pictures, they still socialized within the network of Facebook. Another advantage of the deal is that Facebook may grab talented people of Instagram to improve its photo sharing as well as other potential features, especially on mobile devices. The new staff still works on developing Instagram and at the same time, finds out the best way to combine the advantages of Instagram and Facebook.
Financially,