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WhatsApp Waited for the Right Buyer and It Might Result In a Bigger Payoff

Facebook’s recent offer to buy WhatsApp for $16 billion is not only unusual because of its high price tag, but because of both companies’ claim that the  synergy between the two companies is the focus behind  the deal. Rather than a focus on the big payoff, there appears to be a shift in the mindset of the owners of these technology companies that’s worth considering. 

Let’s look at an analogy of a family selling their house that they designed and lived in for several years. They have a fabulous mansion that’s in immaculate condition and the owners think they shouldn’t have any problem selling for their high asking price based on their valuation. Soon they discover that only a certain number of people can afford this type of house and, beyond that, each buyer has their own desires as to what to do with the property. For example, one buyer is a developer who just wants the land and another buyer is an extended family with a need for lots of room. Let’s say both buyers are offering the same price. The sellers might not want to sell to the buyer who just wants the property and is going to tear the house down. They want the property to go to the family who will take care of and appreciate the home. 

Should you walk away from a business acquisition offer if you don’t like the direction they want to take your company? Matching buyers and sellers is never easy and that’s a tough decision to make. As noted above, WhatsApp, a company with just 55 employees, originally turned down a $10 billion offer from Google. It's speculated that Google was going to absorb WhatsApp into Google's giant conglomerate of interests, but Facebook is willing to let WhatsApp continue to operate as a separate entity. And even though a company limits itself in potential buyers with a higher price, it seems to have paid off in this case because WhatsApp knew what they wanted – to keep their product and their company structure intact.
 
Jan Koum, a co-founder of WhatsApp, was quoted in a recent NY Times article as saying, “Selling the company is easy.… It happens in Silicon Valley all the time…. That doesn’t make you special, it doesn’t make you unique, it doesn’t make you all that great.” 

The mindset of these tech owners appears to be different. Maybe they’re holding out for something more than money. Only time will tell if this new business attitude will be successful. 

Marc Fogarty, Audit Partner and a member of EisnerAmper's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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