Facebook Acquisitions and Their Impact

This assignment requires a comprehensive analysis of Facebook's acquisition strategy. Students need to examine the company's motivations for acquiring other businesses, exploring factors such as market dominance, technological advancement, and user base expansion. The impact of these acquisitions on Facebook's growth and overall business success should be evaluated, with specific examples like WhatsApp highlighted. The assignment delves into the strategic reasoning behind Facebook's acquisition decisions and their consequences.

Running Head: Organization Development and Change
Organization Development and Change
Mergers and Acquisitions

Organization Development and Change 1
Contents
Introduction.................................................................................................................................................2
Background of Organization........................................................................................................................2
Why Organizations involve in M&A.............................................................................................................3
Merger.....................................................................................................................................................4
Acquisition...............................................................................................................................................4
Reasons behind M&A..............................................................................................................................4
Successful Guidelines for Mergers and Acquisitions....................................................................................6
Guidelines Facebook followed.................................................................................................................6
Comparison of Guidelines for Mergers and Acquisitions.........................................................................7
My Rules of Mergers and Acquisitions........................................................................................................8
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

Organization Development and Change 2
Introduction
Facebook is known to b e as one of the top most social media companies which has brought the
world closer. It was founded by Mark Zuckerberg in 2004. It initially was created for college
students who used to attend special schools but within just 10 months, the number of joiners
went up to 1 million users. In 2017, the number reached up to 2 Billion users (Toth, 2018).
Mark’s invention was and is growing day by day. With this growth happening, he went on to
acquire 66 big and small companies. Out of them, the largest acquisition done by Facebook is
WhatsApp. FB purchased it for $19 Billion in 2015. There were other fascinating acquisitions
too done by FB. Like Instagram and Virtual Reality. If the total amount spent on all the
acquisitions done by Facebook is taken, the number is so magnificent that it cannot be seen in
any other acquisitions. The number comes down to $22,651,000,000 (zook, 2015). Expanding
the business is like just a step ahead after any idea is implemented. Zuckerberg back then
realized that mobile was the future. Hence, Facebook bought Beluga which was a mobile
messaging company that developed group messaging. Today, Facebook is the second most
popular mobile messaging app in world (Low, 2016). WhatsApp was one of the popular
messaging app for smart phones. After buying WhatsApp, Facebook only grew even more and
more. This was one of the most important acquisitions by Facebook (Anazodo, 2016).
Background of Organization
Facebook was founded July, 2004 by Mark Zuckerberg. The company focuses on creating the
products which helps in connecting with people through computers, mobile phones and apps
(Biography, 2018). Also, it is focused to let people know about the happenings of the world
through it. People can easily share their ideas, pictures and videos too on the same platform.
Products that the company provides are Facebook, Instagram, Messenger and WhatsApp. It also
engages itself in selling advertising placements to marketers. These advertisements let the people
who are marketing them or their product reach to the people based on demographic trends.

Organization Development and Change 3
Marketers purchase the packages to market their product (reuters, 2018). The company
headquarters are in California and the numbers of employees in the company are 23,165 until
30th September (newsroom.fb, 2018). The daily active members are 1.37 Billion and monthly
active members are 2.07 Billion as of 30th September. Mark Zuckerberg was 23 years old when
he was studying Psychology from Harvard University. At this age, he earlier had already
developed many apps as he was a keen computer programmer. In 2004, February, he created
Facebook for college students. Within a day, over 1200 students signed up to the website and in
a month, there were half of the college students who were a part of Facebook. Later other
universities like Boston etc. also promptly responded to it and by 2005, it had 1 Million
subscribers. In 2006, Google etc. companies wanted to buy Facebook from Mark but he refused
to sell it after all (theguardian, 2018). After a year, the subscriber number came up to 30 million
and some of the very famous people also became a part of Facebook. Today, it has more than 2
Billion users and it has acquired over 66 companies till now. The major companies are Instagram
which Facebook bought in 2012 for $1 Billion. Later in 2015, it acquired WhatsApp too for $19
Billion, though WhatsApp could work independently as usual (Olsen, 2014). The idea for
Zuckerberg behind buying WhatsApp was not to earn money but to see the growth in terms of
users and connectivity. WhatsApp is ad free so it is loved by all the users. Also, it charges $1 per
year with the users after giving it free for the first year of subscription. This app was founded by
two former yahoo executives Brian Acton and Jan Koum. Facebook agreed to a deal of $19
Billion with the addition of $3.6 Billion more so that the WhatsApp employees should stay
onboard with Facebook.
Why Organizations involve in M&A
Mergers and Acquisitions also known as M&A, have become so common these days as the
corporate world is growing. If any merger or acquisition talks place in the market, it is very
likely that everyone would be having the knowledge of the incident through news, articles,
papers, TV or any social media. The term means that the value of the two companies’ combined
is more than those two companies when separated. It is basically the collaboration of the two.

Organization Development and Change 4
Sectors where mergers and acquisitions tales place are finance, telecommunication, IT,
Pharmaceuticals, chemicals and oil etc (Xiaofang, 2014).
Merger
Merger happens when two companies join each other to make one single company but with a
new name. Usually a merger takes place between two companies which are same in size or have
equal stature. It is then called as a “Merger of Equals”. But sometimes, merger also happens
when two companies differ in size (compcomm, 2015).
Acquisition
Acquisition happens when one company acquires or buys the other company and that company
name is completely lost after that. The company which has acquired the other one gets to keep
the same name. The company which is bought is usually smaller than the one who bought it
(Schade, 2014).
Reasons behind M&A
Mergers and Acquisitions are stated to be the strategic alliance and rational financial which are
made in interest of the organization and the stakeholders of the company. Maximizing the profit
and financials value is the main objective behind this process (Sue Cartwright, 2014).
Mergers and Acquisitions take place because of many reasons. Some of them are:
 When companies look forward to enter into new market where they are sure of excelling,
they merge or acquire with the companies that have already made their mark in that
particular sector. For entering into new market, companies always will choose the other
company from which it can learn.
 To enhance the shareholder value too, sometimes, the company’s merger. This is done
by:
1. The reduction in cost which is achieved by operating, trimming the workforce and
combining the departments.
2. By absorbing the market share and major competitor, the revenue is increased.
3. Cross selling of services and products.

Organization Development and Change 5
4. Saving achieved in tax when a company which is in profit merges with the loser
company.
5. To boost investor’s confidence and stabilize earnings, diversification helps.
 When the management of any company realizes the need to transform its corporate
identity, mergers and acquisitions takes place.
 It is also used for risk spreading
 When synergies signify that the greater is whole than parts, acquisitions happen to
achieve horizontal and vertical operational synergies.
 To dominate the market and reaching on t o the economy scale, mergers and acquisitions
takes place (Pineda, 2016).
 By buying out the suppliers after the merger or acquisition, the cost can be reduced on
the whole.
 Sometimes, managers also have shares in the company. And if the company acquires,
managers are also at growth as they will get the shares of the acquired or Merged
Company as well (Ray, 2015).
There are some specific rationales too because of which mergers and acquisitions happen.
 Strategic Rationale: Strategic rationale is used when the strategic objectives are to be
achieved. Acquisitions and mergers are usually not central to achieve strategic
objectives and there are other options available. To secure control of the capacity is a
good example of merger.
 Speculative Rationale: This type of rationale takes place when the company which is
acquired is used as a commodity. Any company would acquire or buy the other
company when it is a potential target and it can be proved beneficial for the company
which bought it. The only risk in this type of acquisition is that the acquirer company
can do anything with the company it acquired. It can either sell it or split it in parts.
This rationale is very vulnerable to the environment changes.
 Failure of Management Rationale: If the management side has failed badly, mergers
and acquisitions are the only way to save it. Wrongfully aligned strategies or
conditions of the market can significantly change while implementing timescale.
Results of that will be that the initial strategy becomes misaligned.

Organization Development and Change 6
 Political Rationale: Impact of politics is everywhere now days. It is also becoming
important with respect to mergers and acquisitions. The mergers and acquisitions
which happen due to politics usually take place on Governmental levels.
 Redefining Business rationale: Redefining of business is sometimes done with the
help of mergers and acquisitions. When any organization’s growth stops or the
mission and the goals become stale, for example a technical change, mergers and
acquisitions come to rescue. The organizations will not be able to completely change
the technology due to the investments so company acquires for its business to
redefine (Ayesha Alam, 2014).
Successful Guidelines for Mergers and Acquisitions
Guidelines Facebook followed
When Facebook wanted to acquire WhatsApp, Google was also having an eye to acquire it. After
Facebook’s two weeks negotiation process, Facebook won over WhatsApp for $19 Billion. It is
also believed that WhatsApp was offered more money to take the messaging app out of the
Facebook (NEWMAN, 2014) .
There are a few strategies or rules that Zuckerberg followed for successful acquisitions. They
are:
 Building Relationships: Mark Zuckerberg usually build relationships first with the
company he wants to acquire. He thought for a long time about the companies he wanted
to acquire and then made friendships or build a good and a positive relation with the
owners of the companies he wanted to acquire. He had maintained friendships with
WhatsApp owners or Instagram owners for years before he went on to acquire them. It
reduces the competitiveness from in between the owners and the acquisition can go
smoothly without any rivalry or fights.
 Shared Vision: Zuckerberg has acquired many companies by pitching a collaborative
vision for both the companies. The most significant thing was to align a shared vision on

Organization Development and Change 7
which both the acquirer company and the acquiring company work together. It is always
better to work collaboratively rather than separately.
 Scare Tactics: Sometimes, scaring the small scale enterprises is also helpful. Small start
ups are easily afraid if they are made to imagine the difficulty they might see in running
their business. Though this was last in Zuckerberg’s mind, this technique is also valuable
according to him.
 Fast Movement in Buying: Sometimes, while making the deals, the buying companies do
not have much time to think over and over. Other big companies also do have a keen eye
on the same companies. Hence, one should just take the decision for the deal and break
the rules (Heath, 2017).
Comparison of Guidelines for Mergers and Acquisitions
The golden rules that Cameron and Green suggested are the key rules which are to be applied
while any company either go for mergers or acquisitions. They are:
1. Constantly Communicate: Companies which are interested in mergers and acquisitions
generally do not give emphasis on the employees or the culture etc. They just think about
the necessary details that are to be given importance in the process. The top leaders
should not just simply see the facts and figures; instead they should build relationships
and establish the trust for a future joint venture. In Facebook’s acquisition too, Mark
Zuckerberg had maintained the relationships with the companies well before he got ahead
and propose the deal. He had 2-4 years of friendly relationships with those companies.
With the help of communication, one can very easily share about the vision that the
acquiring company has in mind and the acquisition can take place in a very peaceful and
healthy way.
2. Get the Right Structure: The Company which is being acquired has to obviously match
up to the structure of the company that is going to acquire it. In almost all the companies,
there is already a structure maintained. After the merger or acquisition, the acquired
company will have to match up to the new structure. The leaders have to make sure about
the new structure, understand the facts and match up. This work should start as early as
possible as it takes a lot of time in implementing it. It should start before the deal closes.

Organization Development and Change 8
A few companies use integration team to support this kind of planning. It depends on the
type of merger or acquisitions if the integration is required for the whole company and
the stakeholders or only for the higher leaders. Not to mention that this type of alignment
was not done by Facebook. Facebook wanted all the companies to work as they were
working before.
3. Tackle Culture Issues: Two different cultures are not very easy to merge. While mergers
and acquisitions take place, the culture issues are very often seen in the companies. For
Example, some companies are very strict in the cost cutting etc. but others are not. If
these two types will be merged, one will have to match up to other. Changing that
completely is very difficult and may take too long to be implemented. The leaders while
the process of acquisition or merger should meet the team and explain the process. Also
changes in the structure or culture should also be shared. Setting up the expectation is
easy if done on the right time. When Facebook acquired WhatsApp, Mark wanted more
people to communicate with each other and work together. Cultural differences in this
case (Facebook acquiring WhatsApp) might not have existed as WhatsApp still works
independently even after being acquired by Facebook. However, the growth options or
the visions are shared.
4. Keeping Customers on Board: Customers are very important people in terms of business.
Every merger and acquisition looks forward to new heights of business. Thinking about
the customers first would make the organization reach their goal. Facebook made sure
that their users should stay satisfied with the product. Be it Facebook or WhatsApp. The
first thought that Zuckerberg has was to keep its customers satisfied and grow in number.
5. Use Clear Process: While a merger or acquisition takes place, there are a lot of things that
needs to be taken care of. There are things that are to be done process by process. It takes
phases to complete the tasks to create a smooth merger and acquisition. Mark Zuckerberg
had clearly thought of acquiring WhatsApp or any other company since years. He had a
long thought about the process and that is why the acquisitions were done successfully
and smoothly (Green, 2017).
My Rules of Mergers and Acquisitions

Organization Development and Change 9
If I am to decide or create the rules for Mergers and Acquisitions, then these will be the rules.
 Pros and Cons thinking: While the company thinks about the gain that it is going to have
with the merger or the acquisition, the cons should also be thought of and mitigate them
prior to the process. The worst situations are also to be given a thought so that the risks
do not take place.
 Involve the Stakeholders: The employees of the company are a very important part of the
company as they are the people behind every work and every success that the company
gains. Hence, they should be a part of decision making too when the company is thinking
of making a merger or acquisition. Their ideas can also be valuable for the company.
 Customers First: A customer should be on the priority list for any organization who is
thinking of growing in the market. Customer should never feel cheated and then only
they will trust the company and stay by them always.
 Ethics: A company should never do anything unethical as it will not be good for itself as
well as the people who used its products. Being unethical is the way to downfall which a
company never desires for (Lavinson, 2018).
Conclusion
Mergers and acquisitions are in trend these days. In the growing corporate world, organizations
look forward to be on top. Mergers and acquisitions are a good method to be on top as it helps
the organization to take the good decisions for itself and its employees. While merger helps the
company in many factors like cost reduction, new culture etc., acquisitions helps the acquired
companies to not wither. Rather it can stay in market and grow itself by handing over the
responsibility to the strong one. Facebook is one organization which has acquired many
companies in the past few years and followed some of the good guidelines so that its acquisitions
were very smooth and friendly. Rules of mergers and acquisitions are discussed here as well as
Cameron and Green’s guidelines are also compared with the guidelines which Facebook
followed. Overall, mergers and acquisitions can prove to be good for the growing companies as
it can make them stronger in the market.

Organization Development and Change
10
References
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https://www.iafrikan.com/2016/04/30/why-this-is-probably-the-most-important-
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http://time.com/8806/facebooks-whatsapp-acquisition-explained/

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