Amazon's Acquisition of Dubai Based E-Commerce Company Souq.com

May 19, 2017

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In this episode of TechTalk, we discuss recent mergers and acquisitions in e-commerce including Amazon's recent acquisition of Souq, a Dubai based e-commerce company. Souq had other interested parties such as a local mall developer who ended up backing Noon - another Middle Eastern e-commerce site and Souq competitor.

Why is this an important tech acquisition for Amazon? Not only are they entering a market with significant growth potential but geographically there might be a showdown between Amazon and Alibaba in the rapidly developing Indian market. It looks like things are looking pretty rosy for Amazon’s CEO Jeff Bazos who just passed Warren Buffet to become the second wealthiest person on the planet.


Transcript

Dave Plaskow: Hello and welcome to EisnerAmper’s Technology podcast series. With more than 500 technology clients, we’re always interested in the latest trends and developments as well as any related business and accounting opportunities and challenges. Today we’re talking about Amazon’s acquisition of Middle Eastern e-commerce company Souq. I’m your host Dave Plaskow and with us today is Dave Katz, senior audit manager in EisnerAmper’s technology and life science practice.  You know it, you love it, it’s TechTalk. Dave, greetings and salutations.

Dave Katz:Dave, good to be here again.

DP: So Dave, it looks like Amazon has taken another step on its way to global domination.

DK:  Yep, here we are talking Amazon again in their acquisition of Dubai based Souq.com.

DP: Tell us a little bit about Souq.

DK:  Sure, so founded in 2005 by Syrian entrepreneur Ronaldo Mouchawar, has about 45 million monthly online visitors and sells more than 8 million products to the UAE, Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and Egypt - company valued at about a billion dollars and has 3000 or so employees

DP: Ok, so that’s decent sized company. What does the deal look like?

DK: So terms weren’t yet disclosed but it’s estimated the deal is valued between $615 - $800 million. Interestingly Amazon was only looking to acquire about a 30% stake, and then it went all in and did the whole thing here, so. Goldman Sachs who handled the deal called this the biggest ever technology M&A transaction in this part of the world.

DP: Ok. And Souq had a few other interested parties, correct?

DK:  Yeah, there were a few others - eBay, some other local retail groups were kicking the tires here, and the Dubai based Maude developer reportedly made an $800 million offer and that developer is now backing another Middle Eastern e-commerce site, Noon, which hopes to go live this year.

DP: Ok, so a lot of e-commerce activity in that part of the world.  What is the Middle Eastern E-tail landscape look like?

DK: So currently only about 2% of retail purchases there are made online, which seems like a low number, but online sales growth is expected to grow at about 30% annually and eclipse $27 billion by 2020. So that’s due to a growing population of younger tech oriented customers, and you see the rest of the world where a lot is going to the internet.

DP:  Sure sure, a lot of room for growth there. Now why is this an important acquisition for Amazon?

DK: Yeah, so, they’re entering a market with significant growth potential like I mentioned, and then geographically you may be looking at a showdown between Amazon and Alibaba in the rapidly developing Indian market.

DP: Yup, a couple of powerhouses there. So it looks like things are looking pretty rosy for Amazon’s CEO Jeff Bazos these days.

DK: Yeah, you could say that. He just passed Warren Buffet to become the second wealthiest person on the planet. Net worth of somewhere around $75 billion.

DP:  Wow, yeah, that’s certainly nothing to sneeze at.

DK: Nope.

DP: Well gracias Dave, again, as always for your insights.

DK: Thanks for having me Dave.

DP: And thank you for listening to TechTalk as part of the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this and a host of other topics.  And join us for our next EisnerAmper podcast when we get down to business.

About John Pennett

john Pennett is the Partner-in-Charge of the National Technology and Life Sciences Group, and is a member of the Special Purpose Acquisition Company (SPAC) services team. H


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