Amazon Acquisition of Zappos Case Study

|

Mergers & Acquisitions |

Acquisition Case Study: Amazon’s acquisition of Zappos, November 2009 |

|

Stephen Greening |

26/04/2014 |

WORD COUNT: 2489

Contents

Executive Summary 3

Introduction 4

Amazon Overview 4

Amazon’s Previous Acquisitions 5

Zappos Overview 6

Acquisition of Zappos 9

Strategy 11

Why Amazon wanted to acquire Zappos 11

Regulation 14

Valuation 15

Comparable Company Analysis (Comps) 15

Discounted Cash Flow (DCF) Analysis 16

Precedent Transactions Analysis 16

Historical Stock Price & Next Twelve Months (NTM) Analysis 17

Financing 19

Defence Tactics 21

Implementation 23

Risk 25

Conclusion 26

References 27

Books 27

eBooks 27

Journals 27

Online Images 27

Presentation 28

Reports 28

Websites 28

Executive Summary

In November 2009, ‘Amazon, Inc.’ (Amazon) completed the acquisition of ‘Zappos.com, Inc.’ (Zappos) in a deal worth around $1.2 billion. Amazon announced in July 2009, that it had reached a deal to acquire Zappos in a deal worth $847 million. The deal was financed by 10 million shares of Amazon common stock (worth around $807 million) and $40 million of Cash and Restricted Stock units on the balance sheet.

Amazon is an American international electronic commerce (e-commerce) company, while Zappos is an online shoe and clothing shop. The acquisition of Zappos by Amazon was a friendly takeover; the public announcement, negotiation and acceptance of the acquisition deal are the characteristics of a friendly takeover. The deal was a horizontal merger, with Amazon acquiring Zappos to offset its failed online shoe retail market entry Endless.com.

The rationale for the deal was outlined as follows:

* Amazon believed there was a tremendous opportunity to grow the Zappos brand.

* Zappos was interesting in keeping its brand and culture intact, Amazon supported this vision of an independent subsidiary company....