Thursday, June 27, 2013

The Google Waze Acquisition

The proposed Google, Waze acquisition illustrates many of the themes we've developed in previous posts.  First would be motives for acquisition.  In this case, we have acquiring technology, increasing market share and staying relevant - all consistent with increasing shareholder value (see Catalysts for Merger and  Motives for Merger).  But then we also have Merging defensively - (to prevent a competitor from doing the deal and getting an advantage) and the motive of 'eliminating the competition - by acquiring them'.   Now this may also increase shareholder value, but is, of course, frowned upon by the FTC, which is precisely why the FTC is now investigating the issue.  What criteria will the FTC use in deciding whether the deal is in restraint of trade?  See our post concerning the Herfindahl index.  

As the Wall Street Journal reports, 

"The FTC is expected to focus on whether Waze would have become a head-to-head competitor with Google, whose Google Maps software is the dominant digital mapping and navigation service around the world, or whether there is any evidence, such as emails, that show that Google wanted to acquire the company only to keep it out of the hands of rivals."

The complete WSJ article can be downloaded here.  

All the best,


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