In what can be described as a new chapter in retail M&A, Amazon acquired Whole Foods for $13.7 billion last month. Not only was this Amazon’s largest strategic acquisition till date (about $12 billion more than what it paid to…
In what can be described as a new chapter in retail M&A, Amazon acquired Whole Foods for $13.7 billion last month. Not only was this Amazon’s largest strategic acquisition till date (about $12 billion more than what it paid to acquire Zappos in 2009), but it was also a move that sent several retailers’ shares in a bit of a downward spiral.
Because an acquisition like this could very well herald the beginning of the end of retail as we know it, something that Amazon seems to have anticipated as early as 2007, having rolled out Amazon Fresh then and, more recently, Amazon Fresh Pickup. It’s certain that bricks and clicks are the future of retail.
A recent McKinsey article on M&A activity observed that an acquisition’s strategic rationale ought to fit within one of the six archetypes that it outlined. These archetypes range from improving the target company’s performance, to accelerating market access for the buyer, to acquiring instead of building newer technologies.
Amazon’s strategic acquisitions can fit one or more of these archetypes. In 2017 alone, with a mix of both large and small deals, the conservative buyer has managed to carry out acquisitions across sectors with varied, yet specific objectives.
Amazon made its foray into the Middle Eastern market with its acquisition of Souq.com in March. The website which is also known as the ‘Amazon of the Middle East’ is said to have been the largest e-commerce platform in the Middle East, serving about 50 million users across several countries. This acquisition was in keeping with JP Morgan’s 2017 Global M&A Outlook, which observed that cross-border transactions would be one of the key themes playing out in global M&A in 2017.
Amazon built up its workplace productivity services on its cloud platform, AWS, with the acquisition of Do.com, which was then rolled into Chime, Amazon’s communications suite for businesses. This year, AWS(Amazon Web Services) also acquired Thinkbox Software, which provides creative tools and pipeline technology for media and content creation. AWS had earlier bought video processing service, Elemental Technologies, in 2015 to strengthen its cloud infrastructure services.
With its acquisition of cybersecurity company Harvest.ai, at the beginning of this year, Amazon spent about $19 million strengthening AWS security. Business Insider has estimated that about $655 billion will be spent on cybersecurity globally, between 2015 and 2020.
In addition to these acquisitions, Amazon also moved to register a trademark for a meal-kit service company, causing Blue Apron shares to plummet last week. It remains to be seen which other strategic acquisitions Amazon has up its sleeve, but it looks like ‘Death by Amazon’ could soon encompass several other sectors, apart from retail.
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