Mergers, Acquisitions and Takeovers Case Study

eBay : Bidding Big on Start-up Skype

OR

Abstract:

San Jose, California based ‘eBay Inc’ was the world’s most popular online auction website with over 150 million users worldwide in 2005. Over the years, eBay had built its massive global presence through acquisitions of regional auction sites, payment facilitators and sites that provided auxiliary services to its main business like classifieds and personals. But in September 2005, eBay shocked investors and analysts alike with its $2.6 billion take-over of Luxembourg based ‘Skype Technologies’, an Internet telephony (VoIP) provider. Although Skype was the most popular VoIP provider due to its free and high quality service, many felt that the acquisition’s success was doubtful since the business models of both eBay and Skype were unrelated. Concerns were also raised about the different sphere of operations and the successful integration of the two. Despite such concerns, eBay and Skype were determined to establish their synergies and prove that they had the potential to be an excellent team.

This case delves into the business models of both the companies, brings out their inherent differences and sheds light on the purported synergies of the deal. It also endeavors to compare the acquisition of Skype with eBay’s other acquisitions and raises the debate on the future of the deal.

Pedagogical Objectives:

• To discuss why e-Bay acquires companies outside its core business domain
• How to create synergies through acquisition
• The future of e-commerce.

Keywords : Mergers,Acquisitions,Alliances Case Study;eBay; Skype; Skypein; SkypeOut; eBay-Skype Acquisition; Meg Whitman; Niklas Zennstorm; Janus Friis; PierreOmidyar

Contents : 
The Buyer - eBay
eBay’s Major Acquisitions
The Purchase - Skype
A Good Bargain?
New Ways of Monetizing E-commerce
A Powerful Ecommerce and Communications Engine