For the purposes of this paper, the company that I am working for is Apple Incorporated and the company that I am responsible for taking over is Amazon. Both companies are major information technology enterprises that continue to dominate this industry and provide customers and clients with a versatile range of innovative products and systems to make certain decisions more convenient and efficient overall. Apple Incorporated was established in 1972 by Steve Jobs and Steve Wozniak and was initially a startup with their main focus on the development of a sophisticated Macbook that could perform complex tasks. Throughout the 1980’s and 1990’s, Apple Incorporated grew to become one of the largest IT companies worldwide and in the 21st century, it started to extend its dominant into the area of telecommunications with such releases as its innovative IPhone series and associated brands. The company, Amazon, which for the purposes of this paper is being taken over by Apple, was established in 1994 by Jeff Bezo and initially started as a versatile internet based store that would provide information technology products to its customers. In the early 2000’s, it changed its focus to an online platform that could more efficiently and effectively reach out to a greater audience worldwide instead of its local American reach. In 2016, it is one of the most influential online retailers not just for its information technology focus but ability to sell almost any item over the internet and with little frustration amongst its customers (MW, 2016).
The acquisition of Amazon from Apple fits into Apple Incorporated’s strategic direction. As seen recently within the last 5-10 years, Apple has been focusing more on expanding its diversity and information technology reach and this has seen it develop from a simple computer based company to one that sells phones and other technological devices, which effectively broadens its reach overall (Nasdaq, 2016). One area that Apple is particularly lacking in is online sales and selling products outside of its expertise to people worldwide. Apple currently has the Apple store function but by acquiring Amazon, it would effectively become the most dominant retailer worldwide alongside its current IT dominance. Furthermore, by taking over Amazon, Apple could sell a number of different products other then computers and phones and this would also fit into its strategy of broadening its business focus and having an even greater influence over its customers and clients. Apple also has the ability to have significant influence over its current customers with respect to Apple updates and forcing its customers to acquire new Apple products. An online store that Amazon provides would fit into this current requirement or niche (Nasdaq, 2016).
Three possible synergies that could occur as a result of this acquisition of Amazon include firstly, the take over of significant Amazon stock. Amazon holds millions of dollars of stock, which when acquired, would fall under the management of Apple. Apple already holds billions of dollars of shares on the stock market and this acquisition would subsequently strengthen apple significantly and make it one of the most powerful companies on the American stock market (MW, 2016). The second possible synergy is the acquisition of Amazon customers who use the service to acquire goods worldwide. Apple would acquire millions of customers to its already large client and customer base. This would further generate significant revenue for Apple, which has to compete with other information technology companies such as Samsung and Sony. The third synergy is the resources that are provided by both Amazon and Apple. Both companies use very similar technologies and as such, the combination of both would significantly strengthen Apple’s resources and allow it to provide customers with even more innovative technology and unique products, that can attract a wider and larger customer base overall. The fourth synergy is leadership and management in the IT industry. Apple would be able to take control of the management and leadership structure of Amazon, therefore making it more influential to its customers, clients and the overall IT market and industry as we see it today in the 21st century (MW, 2016).
The two choices selected for the acquisition of Amazon include: 1) Your company acquires 51% of the voting stock of the target company, and 2) Your Company acquires 100% of the voting stock of the target company. The key accounting requirements for the first choice look at gaining the approval of board members from both Apple and Amazon and this involves adhering to the compliance records of both companies and the industry overall. This would also require the use of an external contracting company to assist in the accounting issues associated with such a decision (Nasdaq, 2016). This would be a similar situation for the second choice when considering that Apple would still have the majority of the vote (100% and also 51%) however unlike the first choice, Apple would have more influence to decide on who manages its accounts and the accounting issues that emerge from such a large acquisition overall. With respect to the strategy for preparing financial statements for Apple, both choices would require a partnership based strategy in which Apple would utilize the expertise of senior CFO’s from Amazon and its own structure to assist in preparing financial statements covering the previous financial year and the current financial year. It is identical for both choices since they involve a 51% or greater proportion of the voting stock of Amazon (Nasdaq, 2016).
The choice that would be most advantageous to Apple would be choice 3: Apple acquiring 100% of the voting stock of the target company. There are three reasons why this choice is the most suitable for the current situation. The first reason is that it provides Apple with the most influence and power to make key decisions with respect to the future direction of Amazon. In comparison to the other two choices, Apple would have less power and autonomy and there would potentially be more opposition to any decisions made. The second reason is that Apple can acquire or manage more of Amazon’s accrued revenue and profitability with 100% of the voting stock of Amazon (Nasdaq, 2016). The third reason is that Apple can make more changes to the structure and management system of Amazon with 100% of the voting stock along with decisions related to investor choices (applicable to investors who previously held stock with Amazon).
The type of value (cost of fair value) would approximate to $5 Billion, which Apple will distribute to the public with the public offering. The reason behind this is that both companies are currently billion dollar corporations with Apple close to a trillion dollars. Each company generates hundreds of billions of dollars in revenue per year and as stated, this will remain the same. By offering just under or on 1% of the total worth of both companies, investors can have a significant influence on the direction of both companies but without too much autonomy. (Nasdaq, 2016). It is alternatively proposed that a higher public offering of between 10-20 Billion dollars could be provided when considering that their reported net income as not changed from the acquisition and some investors may be feeling edgy or frustrated with the overall outcome of the acquisition and whether it was worth it in both the short and long term.
- MW. (2016). Apple Inc. Market Watch, Retrieved from http://www.marketwatch.com/investing/stock/aapl/financials Accessed on 24thApril, 2016.
- Nasdaq. (2016). AAPL Company Financials. Nasdaq, Retrieved from http://www.nasdaq.com/symbol/aapl/financials?query=income-statement Accessed on 24th April, 2016.
- Nasdaq. (2016). Amazon.com, Inc. Common Stock Quote & Summary. Retrieved fromhttp://www.nasdaq.com/symbol/amzn Accessed on 24th April, 2016.