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Session 16: November 14, 2007
Mergers & Acquisitions
(Managing Director, Merus Capital
Former VP Corporate Development, Google)
Quote of the Day
"You
gotta know when to hold them, know when to fold them..." ~ Kenny
Rogers
Summary
Today, we examine
how mergers and acquisitions can be viable paths for entrepreneurs to achieve
their mission and/or an "exit strategy."
Required Readings (Policy on Required Readings.)
There is a lot of reading here, so you will need to choose what to skim and what to actually read in depth. We suggest starting with the Byers text excerpt, and then reading "Mergers and Acquisitions for High Technology Companies" with more care than skimming, but still at a relatively rapid pace (do not waste a lot of time on the exhibits at the end.) To complete your overview, you can watch the video clips. This background now prepares you to read the case -- Google 2006 (available online in the course reader) to give you some background on the company, and the important associated document -- the Google/You Tube merger agreement that will be the essence of the transaction upon which we will be focused in this session. The case will clearly be easier to read than the merger agreement. Legal agreements are difficult to digest, even for lawyers! As such, you will not be expected to absorb anything close to all of the details -- instead, try to get a sense of the general transaction and key terms as per the Fenwick and West guide. You might also want to pay close attention to the Article 9 Indemnification provisions in light of the study questions. Team analysis guidelines and study questions are listed below but we will expect (as always) for the entire class to have carefully read these materials and to be prepared for a full discussion. Please note that there has been a TON of press about this deal in the last year, and it is up to you to seek it out as you need it to answer the study questions.
Study Questions and Team Assignment
Background Google Questions
(not to be answered in your powerpoint presentation but issues you should be considering as you prepare your analysis and get ready for class)
1. What were the key factors behind Google's early success? Do you expect the search business to become more concentrated (dominated by fewer firms)? Is search a winner-take-all business? In addition to enhancing its core search business, should Google continue to try and branch out into new arenas? Which of the following would you recommend, if any: 1) building a full-fledged portal like Yahoo's; 2) targeting Microsoft's desktop software hegemony; and/or 3) becoming an e-commerce intermediary like eBay?
2. What major developments have happened at Google since the January 2006 date of this case?
3. Do you view Google's distinctive governance structure, corporate culture, and organizational processes as strengths or potential limitations?
Google/You Tube Acquisition Questions
(To be answered in the standard powerpoint presentation we have outlined over and over again. Six slide maximum not including title page. One slide per question. Your excel spreadsheet section requirement is detailed in the final question down below.)
1. What was the total price tag of the You Tube acquisition and how did Google pay for it? How much of the proceeds went to the venture capitalists who invested in You Tube?
2. What were/are Google's plans to integrate You Tube's operations into the main Google operation?
3. Why did Google decide to buy You Tube? What was the strategic thinking?
4. Prior to its acquisition by Google, what were the primary criticisms of You Tube?
5. What could Google do for You Tube by acquiring them? What could You Tube do for Google by being acquired?
6. What were the biggest risks to both sides by consummating this deal? Did the two parties attempt to mitigate any of these risks in the acquisition agreement?
7. (Excel spreadsheet) Build a very simple model with clearly articulated assumptions that would justify the $1.6B price tag that Google paid for You Tube.
