A Market of Acquisitions and Mergers

Many large corporations continue to flex their financial strength even in the modern economy, serving as an example to many smaller businesses that 2014 is the perfect time to expand.  Recently, mega giant Google bought smart home device designing company, Nest, for $3.2 billion in cash.  Nest was founded by former Apple executive Tony Fadell and was made famous for its smart thermostats designed for homes.  While Google now controls the company, its core leadership group, including Tony Fadell, intends to stay on board and has been welcomed by Google to do so.  The acquisition marks a key one for arguably the world’s leading technology corporation, as Google expands its wings into its user’s homes with hardware for the first time.

While not quite on the same scale as the Nest acquisition, Groupon recently made similar strategic decisions to expand their reach, in acquiring ideeli, a flash fashion retailer with over six million users and one thousand brand partners, for $43 million in cash.  The expansion into new areas separate from previous simplistic “deals of the day” type offers by Groupon continue the company’s new vision as they had previously completed a $260 million acquisition of LivingSocial’s Ticket Monster business in Korea.  This acquisition could prove key in that LivingSocial is seen as one of Groupon’s largest competitors worldwide.  Investors have long pushed the business to be more than just a flash sale seller to no avail, so there is some hope that their recent acquisitions represent the turn that stakeholders have hoped for.

Continuing the trend of crushing competition by purchasing it, Suntory of Japan, which will likely become the third-largest distiller in the world, announced on January 13 that they were purchasing Beam Inc. for $13.6 billion.  Beam is the maker of Jim Bean, Baker’s and Knob Creek bourbon, Laphroaig and Teacher’s Scotch, and Courvoisier cognac.  The thought process behind the move lies in the shrinking market in Japan for Suntory’s product.  As a result, Suntory of Japan intends to place more of a stake in international markets, hence its newfound control of the iconic American whiskey.  According to analysts, Suntory is paying well and fair to the shareholders of Bean as they have been offered $83.50 per share in cash, representing a 25% premium to the American company’s closing stock price on Friday of $66.97. The acquisition proposal set forth values Bean over 20 times its earnings prior to interest, taxes, depreciation and amortization for the 12 months up to September 30.  All in all, the deal represents how an acquisition can be extremely profitable and successful for all parties involved if the proper negotiation and preparation takes place prior.

While not every company may find itself in the rather extraordinary financial situation that Google finds itself in, 2014 marks the upswing of a financial market in which companies of all sizes can reap the potential benefits of well-planned mergers and acquisitions.  With the help of the team at Kang Haggerty LLC, companies of all sizes and types can receive the legal aid necessary to successfully mimic those moves made by the companies above. (albeit probably on a slightly smaller scale)  Structuring a transaction such as a merger (where two or more businesses combine into a new single entity) or acquisition (occurring when one business purchases another) can be a meticulous and complicated process. The team at Kang Haggerty can be of vital importance in ensuring the successful strategic planning, negotiation, and execution of a business seeking a merger or acquisition.