The Big To-Do over Zillow’s Bid to Acquire Trulia in a $3.5 Billion Stock Deal
August 14, 2014
By Marc Fogarty, CPA, CFE
Zillow, one of the most popular real estate websites, is set to acquire competitor Trulia (next in line) sometime next year. Even before the announcement, the stock price for both companies was comparatively high, even though neither company is changing the landscape of the real estate market; nor are they profitable. The CEO of Zillow has even said, “We sell ads, not houses.” So…why the acquisition?
Both sites are popular for buyers and sellers. Buyers start their search online and sellers check to see what their homes are worth. Real estate agents want to attract both markets with advertising. Some agents are concerned that the combining of the two companies could lead to an increased price for advertising, since the two companies would no longer be competitors for the same market.
If nothing is changing for the consumer, and the price of advertising remains about the same, then who are the real winners of the merger? The answer is the shareholders of both companies. The slightly-less-popular Trulia stands to gain the most, with existing Trulia shareholders set to own approximately one-third of the combined company. In addition, if the deal goes through, Zillow will now have a larger share of the market, and they also expect to save about $100 million in costs by 2016. That’s good news for Zillow shareholders too!