Posts filed under “M&A”

Why Apple Should Grab Twitter

Now we know what Apple is going to do with some of their $100B cash pile: Pay a dividend and buy back stock.

Facebook’s IPO is rumored to go out at about the same amount as Apple’s cash pile: $100 billion dollars. No, I am not suggesting Apple buy Facebook. (Zuckerberg has his own path to travel, and it does not go through Cupertino).

But today’s dividend announcement did start me thinking about what else Apple could do with that money. The short answer is to buy Twitter for about $10 billion dollars. And if they could make the purchase with a combination of appreciated equity and cash, even better.

Let me state upfront that I believe M&A to be wildly overrated (IPOs as well); most companies do these very poorly and end up unwinding big acquisitions at great cost eventually. (See AOL Time Warner as the poster child). They pay huge iBank fees to conglomerize, and even bigger fees to de-conglomerize. Outside of big resource mergers in oil or minerals, major mergers rarely work out well. So no, I am not a fan of  most of these deals.

There are a few exceptions. A handful of firms have made strategic acquisitions an art form. Cisco Systems (CSCO) may be the best tech firm at this; GE may be the best industrial making strategic acquisitions (forget that attempted Honeywell thingie). Oracle makes larger acquisitions that has helped grow their revenues over the years (of BEA, PeopleSoft, Siebel Systems, Hyperion and SunMicro).

And Apple? They primarily do small, almost tactical purchases. Even their biggest buy, the 1997 purchase of NeXT Computer that brought the prodigal son back to Apple, was “only” $400m.

Why Twitter?

Apple does software and hardware really well; they do the integration between the two outstandingly. But they haven’t really done Social particularly well. In fact, Apple may be the only Tech company without a Twitter account. Go ahead, check out @Apple0 Tweets / 0 Following / 6067 Followers. Sure, iTunes software is terrific, but the “Ping” social network simply never caught on. Twitter automagically makes Apple a defacto player in social.

Apple’s biggest competitors over the next decade are not HP or Dell or even Microsoft – they are more likely to be Google and Facebook. Which leads us back to Social Networking and that leads to Twitter.

In the last mobile operating system (iOS) upgrade, Apple tightly integrated “Tweet This” in their mobile products. Apple could do a strategic investment in Twitter — a $1 billion or more — and lock in an inside track with Twitter. But why? For less than 10% of Cash on hand, they can acquire an enormous strategic product. They could continue to let Twitter operate as a stand alone entity. They then build in Twitter more tightly into their products as their social network. And it gives them an advantage versus competitors.

Ping gets replaced with Twitter for Tunes; Various photo services (like Flickr) get new competition from Apple Photos; there are innumerable ways a tighter integration can be had between the two companies.

The question is should it? Can Apple achieve its goals without Twitter? Sure it can. But buying some (or all) of Twitter gets Apple 3 things:

1. They become a competitive player in Social Networking instantly;
2. They fix Ping, and begin to monetize it;
3. Most importantly, Twitter is kept from the hands of Google, Facebook and Microsoft.

Twitter is an IPO candidate in its own. I suspect Google might be the better fit – infrastructure expertise, monetizing search, etc. – but there seems to be some estrangement between Google and Twitter for reasons I am not familiar with.

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What do you think? Does this deal make any sense?

Category: M&A, Technology

The Battle Of The Rails

Similar to the Big Bank chart we ran on Monday, this graphic shows a series of mergers in the rail shipping industry over the past 50 years has led to the creation of four freight rail giants that now control 90% of all business.

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Click to enlarge:

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Category: Economy, M&A

via Scribd: BofA Merrill Lynch How Did a Private Deal Turn Into a Federal Bailout

Category: Bailouts, M&A, Really, really bad calls, Think Tank

Long Overdue: BofA to Spin Out Merrill?

Its just a rumor, but WTF: Maybe Bank of America IS following part of our advice, spinning out Merrill Lynch in a sale. I assume this is a quasi-distressed sale, otherwise we’d see an IPO (but for market conditions). Of course, a full blown pre-packged bankruptcy would be the better route. Remember, the bailouts were…Read More

Category: Bailouts, Corporate Management, M&A, Really, really bad calls

China’s European Spending Spree

• Chinese Companies Embark on Shopping Spree in Euro (WSJ)

Category: Digital Media, M&A

Better Legal Advice for Sokol (No, he was not “trapped”)

Time to put on the lawyer hat again: As soon as this story broke, the immediate question was “Why would you be actively trading stocks for your own account when you work for Warren Buffett and recommend acquisitions?” That seems fraught with potential for problems. Does anyone on Berkshire’s legal staff and/or compliance department have…Read More

Category: Legal, M&A

Is Twitter Worth More Than We Think?

> CNBC’s John Melloy mentions what may be the best analysis I’ve seen on the “Charlie Sheen effect.” It comes from Lou Kerner, a keen eyed analyst at Wedbush. (See chart above) Kerner notes that Sheen may be Twitter’s “Lazy Sunday” moment: Content Creators #Winning In December, 2005 a Saturday Night Live skit called Lazy…Read More

Category: M&A, Technology

Top 10 Changes at the NYSE Under German Rule

> The recent a merger chatter between the NYSE and the Deutsche Börse got us wondering: How might life at the NYSE change under their new German management? 10. Effective immediately: No more bell ringing when Chairman David Hasselhoff has a hangover. 9. NYSE changes its tagline to “Das Equities.” 8. Sylvia Wadhwa on the…Read More

Category: Humor, M&A

AOL-Huffington Post: Why the Heavy Breathing?

It’s day two of the $315 million AOL-Huffington Post deal and the non-news just keeps on coming. On the same day that there was $16 billion in M&A, we’re still talking about a tiny deal for advertising inventory. Tim Armstrong’s deal isn’t really the issue. The most important takeaway from the deal is the limited…Read More

Category: Financial Press, M&A

AOL Buys HuffPo for $315 Million

The Huffington Post, Ariana Huffington’s news and political focused website, has been acquired by AOL for $315 million — $300 million cash, the rest in stock. Huff Po began in 2005 with a $1 million investment; it has since grown into one of the most heavily visited news Web sites in the country. The NYT…Read More

Category: Financial Press, M&A, Web/Tech