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Why Would Someone Buy Twitter?

With Twitter struggling, it's time to discuss M&A options

29Sep

When Twitter went public in 2013, shares were sold for eye-watering sums, with the company reaching $24 billion on the first day after issuing an IPO. Problems began when Twitter stopped meeting shareholders' expectations, cause the price to nosedive. The situation worsened when Twitter published its quarterly mixed report, revealing a disappointing loss in revenue and value of shares respectively, despite analysts' and Wall Street predictions of slightly better results.

A state of turbulence in the company has been caused by a number of factors, but among the main ones is the continuous decline in demand for advertising and poor user growth. At this point, it doesn't seem like Twitter is capable of handling such problems alone. There have subsequently been reports - now confirmed - that the company is open for an M&A deal, and there is already a small queue considering the deal, including Salesforce, Disney, and Google (Alphabet). Whether it's a Twitter's last resort or a tactical move - the deal is likely to be a bargain for buyers, with analysts predicting the purchase price to be balancing nowhere near the peak times Twitter had in the past.

As recently as April 2015, Twitter was trading at $50 per share - way above the initial share price of $26 when it went public. However, recently, most of the time the trade has been below the initial value, averaging around $20 per share, and even reaching a dreadful $18.63 last Thursday. Analysts have already started accepting bets, and some think Twitter would still be able to be acquired with the price based on at least $27 per share. The formal proceedings are likely to kick off in the next couple of weeks, with Twitter having the last chance to boost their shares' performance.

Considering that no one among the global media companies expressed an interest in the deal so far, why would Salesforce, Disney, and Google be interested in Twitter?

Salesforce

As Vala Afshar, Salesforce's Chief Digital Evangelist explained in his tweet: 'Why Twitter? 1) Personal learning network, 2) the best real-time, context-rich news, 3) democratize intelligence, 4) a great place to promote other.' The answer also lies at the core of the Salesforce's purpose - effective management of customer service and marketing campaigns - two elements Twitter already knows how to deal with. Also, among the interests of all three current bidders is an enormous store of Twitter's data and opportunities it creates. Unlike bigger size companies, if Salesforce and Twitter proceed, the deal will be more of a merger than an acquisition, and Salesforce would be taking a risk with testing the patience of its shareholders.

Google (Alphabet)

Unlike Salesforce, Google has a significant amount of reserved funds and the company has never hesitated to be adventuristic with its projects. The only sector Google couldn't crack so far is social media - achieving success elsewhere with search engines, maps, mail service, smartphones, and even driverless vehicles. Twitter can be that missing element to catch up with other social media giants and continue growing influence. However, considering that one of the main issues Twitter is currently struggling with is poor user growth, and Google has never been famous for social media skills - the collaboration has every chance to turn out dreadful too.

Disney

Disney has emerged as the most surprising candidate to buy Twitter - seemingly having little to nothing in common with the blue bird. What we need to bear in mind, though, is that aside from being an animation company, Disney also acts as a powerful media source, already owning ABC television network and ESPN. Moreover, Twitter's CEO Jack Dorsey already is a board member at Disney and has close ties with the company's executives. It was specifically after Disney entered the race that Twitter's shares significantly rose in price, causing even more confusion in the business world. Whilst everyone's still guessing what the Disney's agenda with Twitter is, Disney has already sent an advisor to evaluate a possible bid.

Sources

rvlsoft / Shutterstock.com

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