Facebook and WhatsApp Sign a 16 Billion Dollar Deal

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In recent times, the merger and acquisition industry has seen many deals regarding the acquisition of popular start-ups. One such deal that is definitely worth our attention is the acquisition between Facebook and WhatsApp which was announced just last week. The deal is worth $16 billion, and is Facebook’s largest acquisition to date. WhatsApp, which has over 450 million users, is an application which is used for sending free text across the globe.

The CEO of Facebook, Mark Zuckerberg, is aimed at making the website the largest social media network ever and the announcement of this deal has proved that he will go to any lengths to achieve it. This deal will definitely lead to another debate that addresses the value or rather the over-value of consumer internet organizations.

According to the terms, Facebook is required to pay $4 billion as cash, and the rest of the amount will be paid through shares. There is also a chance that the employees of WhatsApp will receive $3 billion in the subsequent four years, which increases the value of the deal to $19 billion.

The acquired messaging service is very popular across the globe, but not that much, in the United States.  Moreover, it does not make much revenue because it does not utilize ads. Users enjoy free service the first year and then onwards a flat rate of $1 is charged on an annual basis. Considering these facts, Facebook may be paying a higher price than necessary.

Previously, Facebook also acquired Instagram in a deal that was worth a billion dollars. At that time, even that amount seemed too much and the deal received a lot of criticism. The same can be expected this time.

A critic stated that Facebook is definitely very smart and are making sure they leave no stone unturned when it comes to growing the company. At times, they launch their own innovative ideas, at times, they copy their rivals and at times, they just go ahead and buy other competitors in the market.

The WhatsApp acquisition has shed light on another important factor. Facebook is not only striving to build its core social networking, but is also making efforts to have their own family of services that will be utilized by millions of people across the globe.

It will be interesting to see what other deals Facebook will conduct this year in their attempt to be the biggest social brand.

Source: www.dealbook.nytimes.com

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