Partnerships / Acquisitions

Past Acquisition Failures, Wins Hang Over Talk Of Big Deals

Ross Says Furloughed Workers Should Get Loans

The past few weeks have been interesting ones when it comes to imagining potential acquisitions in the world of commerce and payments.

One analyst suggested that meal kit delivery service Blue Apron — a company that has been struggling but said it will turn a profit this year — would be better off if Walmart were to buy it.

“Like its $310 million purchase of Bonobos, buying Blue Apron would repeat Walmart’s playbook of acquiring a branded eCommerce startup with a more premium product to its core offerings,” said Matthew Trusz, equity research analyst of Gabelli & Company, to investors. “Further, Walmart could put Blue Apron’s meal kits into its physical stores, which we believe would meaningfully enhance Blue Apron’s profitability (more scale, less packaging).”

The retail chain also plays a role in another acquisition idea, this one floated by activist hedge fund Elliott Management (which owns more than 4 percent of eBay) and Starboard Value LP. The idea? Walmart, Google or several private equity firms might buy eBay — as long as it gets rid of StubHub and its eBay Classifieds Group.

Talk of those possible acquisitions brings up memories of other large payments and commerce deals — and comes amid ongoing preparation for potentially major acquisitions in the coming months and years.

Biggest Deals

Walmart, again, plays a major role: Its 2016 acquisition of Jet.com for $3.3 billion stands as the second largest eCommerce deal of all time, according to one analysis. In first place is the $3.35 billion deal in which PetSmart bought Chewy.

Since that 2017 deal, Chewy.com’s revenue has doubled, according to reports, and PetSmart has said that Chewy is worth $4.5 billion. (PetSmart is privately held.)

Walmart’s Jet.com operation, meanwhile, keeps growing. Late last year, it brought Bonobos and Nike-dedicated shops onto its site. That news came as Jet revamped its eCommerce website to better compete with Amazon. Its updates include a larger selection of items along with speedier delivery, among other features, as the company seeks to tailor customers’ experiences based on their past purchases and zip codes.

Other big and memorable eCommerce deals include Ariba’s $1.86 billion acquisition of Tradex in 1999, Amazon’s $1.13 billion purchase of Zappos.com in 2009 and Alibaba’s $1 billion purchase of Lazada in 2016.

Payments Acquisitions

On the payments side, one of the most notable recent deals includes the $22 billion megadeal that has Fiserv buying First Data. As well, PayPal last year bought payments payout platform Hyperwallet for $400 million in cash. But PayPal’s biggest deal to date was the May 2018 acquisition of Swedish payments company iZettle for $2.2 billion in cash.

PayPal seems primed for more acquisitions, as the company has set up to $3 billion a year for future deals. The goal? Providing a full-scale payments and commerce experience for consumers. “In today’s digital world, consumers want to be able to buy when, where and how they want,” said PayPal CEO and President Dan Schulman in a previous statement.

Big Failures

Of course, not all payments and eCommerce acquisitions turn out well, and it’s useful to recall those failures as we talk about new deals that heated up this month.

One such deal is the 2005 acquisition of Skype by eBay for $2.6 billion. “The thinking was that enhanced communications technology would help buyers and sellers better connect,” reads an analysis from CBInsights. “The outcome was less than spectacular, though, with few eBay users (buyers, sellers or shippers) having any real reason to communicate in any way besides email.” The online marketplace ended up selling off most of the company in 2009.

Google, too, has made notable missteps — a reminder, during this time of fresh acquisition talk, that even the biggest players are never infallible.

Take its 2011 deal to buy Motorola for $12.5 billion. “What ensued was a nosedive by Motorola, which included the release of a series of underwhelming phones and a broken promise to upgrade older Motorola phones already in consumers’ hands to the latest Android OS,” CBInsights said. “For Google’s part, it kept releasing its own branded phones under the Nexus brand, partnering with Samsung, Asus and LG to manufacture these devices, and further eroding the value of the Motorola acquisition.” Two years later, Google unloaded Motorola to Lenovo for $2.9 billion.

The coming year will bring other big deals, and this trip down memory lane reminds us that even deals that might look good on paper may end up crashing before too long.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 AML/KYC Report, Zillow’s Justin Farris tells PYMNTS how the platform incorporates stringent authentication without making the onboarding and buying experiences too complex.

TRENDING RIGHT NOW