A business acquisition is the process of one company purchasing 51% or more of another business’ shares, in order to take control of that business. In doing so, the acquired business gains new leadership, and the larger organisation quickly broadens its resources and its audience. There are a number of benefits to business acquisition, and the primary focus tends to be diversification of market offerings. Businesses in the same sector but with different niches in product or service often combine to dominate more of the industry.

High profile business acquisitions are a risk, but the reward is absolutely excellent with careful strategy. Large companies such as Disney and Facebook expand their empire depending on the trends they predict for the coming years. An acquisition for these giants can prove much more financially successful than internal investment in developing new technology. 

 

Disney acquires 21st Century Fox (March 20th, 2019)

In order to tackle the rise of internet streaming, Disney sealed a £54 billion deal acquiring the film and TV assets of 21st Century Fox. As part of the agreement, Disney absorbed the Fox film and TV studios, the FX Networks, and National Geographic in a considerable boost to their content. Still mainly family-friendly, 21st Century Fox movie content merged perfectly with Disney’s offerings, while some more adult Fox TV shows could further Disney’s reach to older audiences. 

This acquisition came around 6 months before Disney launched their streaming service ‘Disney+’, boasting all episodes of the Simpsons, and National Geographic programmes, as well as their initial catalogue of Marvel and Disney family movies. Diversifying their content before launching Disney+ as a streaming service was a wise idea, since Netflix hosts a wide range of entertainment genres suitable for different family members. 

Disney content is popular enough in its own right to justify an individual streaming service, but not diverse enough to rival the offerings of Netflix with their original series and Dreamworks films. Without 21st Century Fox assets and National Geographic content, only Disney fans and Marvel lovers would be inclined to pay for the service. For the beginning of an expansion, the Fox acquisition was an impressive move by Disney. 

Disney also absorbed 21st Century Fox’s 30% stake in Hulu, another streaming service. This newly acquired 30% stake added to Disney’s initial 30% stake in the platform, to make a majority share of 60%. To consider that Hulu received twice as many new customers in 2019 (CNBC, 2019) than Netflix was signing up, Disney has quite obviously entered and grasped the internet streaming market.

 

eBay acquires PayPal (October 3rd, 2002)

eBay and PayPal worked hand in hand before the over £1 million business acquisition. PayPal payments were an option for both buyers and sellers on the eBay platform, but eBay was in the works establishing an alternative payment method called ‘Billpoint’. Billpoint was a move that had the potential to ruin PayPal entirely, since 61% of PayPal business came from eBay transactions. 

Billpoint didn’t prove as popular as PayPal, however. A 75% majority of eBay sellers allowing electronic payments chose PayPal as their platform of choice (The New York Times, July 2002), compared to only 27% offering Billpoint. eBay and PayPal’s reliance on one another for custom established an interdependency, yet a competition, between both organisations. 

Before the acquisition, eBay received roughly 7% of each transaction value made through PayPal, rising to 10% per transaction after PayPal was acquired. PayPal also benefited from the acquisition, since their rival Billpoint was halted and business through eBay transactions was guaranteed. For guaranteed business security, a 3% decrease in profit per transaction was a small price to pay for the 4 year old PayPal.

With the increased profit for eBay per PayPal transaction, eBay was sure to promote PayPal as a payment option during checkout. Establishing PayPal as a trustworthy and reputable payment option encouraged growth of the PayPal business, while eBay was providing more choice to its users and establishing loyal buyers and sellers. It’s hard to guarantee that this acquisition was instrumental in both PayPal’s and eBay’s success, but both businesses are still operating in 2020. 

 

Facebook acquires Instagram (April 9th, 2012)

In an unexpected move, Facebook purchased the photo-sharing app Instagram for an astonishing £629 million in 2012. At the time, Instagram only had 13 employees, making each worth around £48 million a head. The professional valuation of Instagram was around half the price, carried out just days before Facebook acquired the platform. 

Twitter put a bid of around £315 million for Instagram days before the Facebook acquisition, but ultimately proved unsuccessful. Mark Zuckerburg, Facebook’s director, openly regarded Twitter as his most significant social media rival, and recognised the leg-up that Instagram could have given for Twitter’s success while Facebook’s mobile app was struggling. One of Instagram’s most impressive features was that it allowed for app posts to be instantly shared as a tweet, for users to be able to update both networks at once. Facebook couldn’t afford to let any further intertwined features between Twitter and Instagram while battling HTML5 issues affecting their mobile app’s functionality and popularity.

At the time of the acquisition, Instagram boasted 30 million users and around 5 million posts were being uploaded daily. Instagram was a fierce social networking space in its own right, and has continued to grow rapidly – estimating hosting 1 billion monthly users as of 2019 (CNBC, September 2019). As a result of Facebook’s investment into Instagram, Facebook’s ‘camera’ app wasn’t developed as heavily, and less budget was allocated toward the project. This acquisition saved time and effort from Facebook, while it’s secured serious profit – with Instagram now being valued at £78 billion. That’s considerably more than what Facebook had paid for the acquisition.

 

Business acquisition is a valuable process, combining the resources of two successful companies under the umbrella of one parent business in order to dominate a market. Though the business acquisitions we have discussed in this article are on a million or billion pound scale, acquiring a small business can be just as beneficial. Fill a gap in your expertise by purchasing an established business, and double your customer database. If you’re interested in learning more about the benefits of a business acquisition on a fast-track programme, please contact us.

In order to run your business effectively, you as a business owner should have a clear picture of your organisation’s financial health. Financial health goes past measuring company profits and outgoings since there could be hidden value in your business that you’re not currently aware or making use of. 

A valuation of your business puts a concrete price tag on your company as a whole, indicating your company’s likelihood of success and opportunities for progression. A valuation can also help to identify areas where investment is going to waste. Company value can include an analysis of management, the market value of your assets or its capital structure.

 

What is a valuation?

In short, a valuation of your business is the price tag that you could sell it for. This company value is an assessment of the money you’re currently making, while incorporating the profit you’re likely to make in future. An understanding of your company value is particularly useful when you’re searching to secure additional funding for your company, or if you’re looking to sell it to investors. A formal valuation of your company indicates its sustainability, rather than focusing solely on your current profit as value.

There are a lot of factors that can affect the valuation of a business, including the situation leading to the assessment. A forced sale will significantly decrease the result of your business valuation, whereas a voluntary evaluation leaves you on good standing. Your staff are equally as important, as reliable and experienced employees and an effective management team assure that the business will flourish even without your input. 

Arguably, your financial record is the most significant factor that could influence your valuation. If your business’ finances don’t add up correctly, any investor will suspect fraud and avoid your company entirely. Detailed records showing the level of debt you’re in, present and future cash-flow and profit projections all speak to a well-evidenced past, and your organisation seems more trustworthy straight away.

Intangible and tangible assets are also considered within a business valuation. Intangible assets can include your business’ growth potential, your trademarks and intellectual property, and your customer lifetime value. These assets play a hard-to-quantify but incredibly important role in your company’s overall value. Tangible assets include your business premises, equipment, stock, and the number of active clients you have. These tangible assets are easier to measure, but oftentimes less impactful unless your office space or machinery is incredibly expensive. 

 

Why carry out a valuation?

A realistic estimate of your business value is vital for progression. To secure investors, you must provide some assurance that you’re reputable and likely to turn a profit. Your business is nothing but a financial opportunity to potential buyers, so quantifying your business values in terms of profit is essential. Also, a concrete price tag on your organisation provides guidance as to what sort of industry deals you could aim toward, and how much you can realistically ask your staff for shares in your company.

Identifying factors that are depleting the value of your business can be just as beneficial. Even if you aren’t looking to sell your organisation, realising your shortcomings after a valuation can help guide a repair strategy. Pinpointing and focusing on underperforming areas of your business assures that your successful ventures aren’t counteracted by a poor financial record, or unreliable staff. 

Lastly, but most importantly, a realistic business valuation will help guide your annual financial goals, business strategies and marketing objectives. Your business could afford to and benefit from putting twice as much budget into marketing. Still, without a full and extensive assessment, you will feel your current strategy is performing well enough. Speed up your growth as much as possible by assessing where your budget is best spent, starting with a business valuation.

 

When do I carry out a valuation?

It’s worthwhile to calculate the value of your company annually. A new report is beneficial to guide annual business strategies, and twelve months allows for some market change. Try to time your valuations on the month that is most profitable for your business! For example, if you are a Christmas decoration provider, November to December will be the busiest time of year to measure. Different types of business valuation are best carried out at different times, too.

 

How do I carry out a valuation?

A business valuation can be carried out by yourself, or you can hire the services of an independent firm. There are also a number of different valuation methods you can choose from.

Asset valuation takes into consideration the value of your business’ tangible and intangible assets. The Net Book Value of your company is calculated by adding together your tangible and intangible assets, and then subtracting debt and outstanding credit from your total. For this approach, it’s a good idea to regularly maintain records of your assets so that their value takes inflation, depreciation and appreciation into consideration. With the possibility for fluctuation in asset value, this type of valuation can be performed more often than other types. Once every six months may work well.

Entry valuation bases its value of your business by how much it would cost to establish a similar business. In order to get an accurate estimate, you need a list detailing start-up costs, including securing office space, training employees, establishing a customer base, and developing products and services. Whatever your total comes to is the initial valuation of your business! This valuation method is best suited to incredibly new businesses without detailed records of profit, and it wouldn’t change quickly enough to need to be carried out more than once a year.

Another popular form of valuation is comparative analysis. Comparative analysis bases the value of your company on the price of rival companies that have been sold at a similar size. This valuation is the most simple, but it has its flaws. It doesn’t take into account your specific company assets, and it doesn’t necessarily track the competition of your market. You can perform this valuation several times a year, but it’s reliant on companies like yours being sold often. 

 

Carrying out an annual valuation of your business is responsible in order to assess how your investments are growing and developing. Annual business strategies and marketing objectives can be much more ambitious with a concrete understanding of your company value, ultimately guiding you to make the right move at the right time. Even if the right move for your company is deciding to sell your business, you can determine a reasonable price tag with this article.

 

The internet has given birth to a slew of “internet celebrities” and some of them are capitalising on their influence by building and selling their business, making millions in the process. As the internet in general as well as the practice of sharing our lives online has increasingly grown in popularity, so has the rise of online influencers; people who share all or part of their lives online for the sole purpose of entertaining their fans. What once started off as a close-knit network of followers and content creators, has now amassed into a multi-million or even multi-billion-dollar industry.

In this post, we will look at a few of the best examples of internet celebrities who have made millions from launching their own businesses, one of which (Vlogger Casey Neistat) sold his company to CNN.

 

 

Huda Kattan

Huda Kattan always had a dream of making it in the beauty industry. In 2010, she started her own beauty blog ‘Huda Beauty’ whilst working as a makeup artist in Los Angeles after moving there from Dubai. It was then while her blog was gaining traction online that she noticed a demand for a type of false eyelashes that at the time didn’t exist. In response to this, Kattan decided to create her own for her clients and soon began to develop a brand with the same name as her blog. Huda Beauty was extremely successful, helped massively by Kattan’s ever-growing online presence. In 2017, private equity company TSG Consumer Partners acquired a small minority stake at the end of 2017 in a deal that valued the company at $1.2 billion [source: Forbes, 2019] and Kattan is now said to have a net worth of $610 million.

 

 

Casey Neistat

Casey Neistat is said to be one of the first internet celebrities to make millions from making online content. In 2014, alongside Matt Hackett, Neistat launched Beme Inc. which then went on to develop Beme – an app that allowed users to create unedited 2-8 second videos, which are instantly posted and shared with the user's subscribers, without reviewing the video first. In 2016, CNN acquired Beme Inc. for $25 million in a deal that was talked about extensively online all over the world. Although the app is no longer active, Neistat is still seen as incredibly successful and is said to have an estimated net worth of around $16-20 million.

 

 

Jeffree Star

Jeffree Star originally began his journey into business through being popular on MySpace where he would blog about his life as well as his music and fashion design careers. After gaining popularity online, Star launched his own cosmetics brand – Jeffree Star Cosmetics – in 2013. In 2014, the business launched its first collection of lipsticks which were met with excitement from Star’s loyal audience and the range kept selling out, which prompted the brand to develop further products. As of today, the business is still a huge success, with Star reportedly having a net worth of around $200 million.

 

 

It’s clear from the examples we’ve discussed in this post that launching and maintaining a career online is entirely possible. If done right as we’ve seen here, there are literally millions to be made. It seems that the majority of an internet celebrity’s success is dependent on followers, subscribers and other loyal fans to make that transition from watching or reading about their favourite influencers for free, to paying real money for tangible products created and designed by them.

Whilst the future of any business always holds a degree of uncertainty, it seems like the online influencer community isn’t going anywhere fast, making it a highly profitable industry where building and selling large businesses is quickly becoming the norm.

 

Making the decision to sell your business is a huge step for anyone. Sometimes your company is ready to be sold now whereas on other occasions it could be best to hold onto it a little longer. If you’re interested in weighing up the pros and cons of both, you’re in the right place!

 

 

To Sell: Increasing Risk

Risk is of course an aspect to just about any, if not every, business. However, if that risk is continually increasing with no sign of decreasing or slowing down, it might be the right time to sell your business. As your company grows and increases in value, so does the impact of failure. Therefore, if you don’t feel comfortable or you just don’t want the pressure of your business collapsing or significantly decreasing in value, then this could be another indicator that it’s time to sell.

 

 

To Wait: You’re Still Passionate

If you’re still passionate about the business and feel like it still has room for growth and development, then it may be best to wait a while before you consider selling. Passion ultimately can be the driving force of a business and if that’s still there, then waiting could potentially serve both you and your company very well.

 

 

To Sell: Retirement

If you’re about to retire or have been thinking about retirement, then it could be better to sell your business. Although you could still be passionate about the company and have aspirations for its growth, if retirement is at the forefront of your mind, then it may be best to rethink staying with the company. Sometimes it’s better to leave a business while you’re feeling refreshed and optimistic about its future (to allow you to put any final expansion processes or growth plans into place) than to wear yourself down and, upon eventually retiring, be leaving the business negatively with no belief in its future development.

 

 

To Wait: You’re Not Happy with Existing Offers

Just because someone offers to buy your business from you, this doesn’t mean that accepting the offer is always the right thing to do. If you have a gut feeling that something isn’t right or you’re simply not happy with the price proposed, then it might be a good idea to wait for alternative offers or to look at negotiating existing offers.

 

 

To Sell: You Don’t Have Aspirations for the Business

This links back to our previous point about waiting to sell your business if the passion is still there. On the other hand, it could be best to sell the company if you no longer have aspirations for the business or don’t have a vision for its future development. Keeping and staying with a business when you feel like this might seem like the honourable thing to do (especially if you’re emotionally attached to the company) however in doing so, you could be doing more harm than good and, in the worst case scenario, this could cause your business to fail.

 

 

To Wait: Interest in Your Industry is Steadily Increasing

This point is all about timing. If interest in your industry is steadily (not rapidly) increasing, then it might be a good idea to wait until this interest seemingly reaches a peak. This would place your business in a desirable stance to be sold and should be of peak market value as long as everything is in order and you have no problems such as legal issues.

 

The decision to sell your business is huge and there are a lot of options to weigh up and consider. Ultimately, only you can truly tell when the time is right. If you do decide to sell your business and need some advice on where to go next, don’t hesitate to contact us today. We’ll provide you with expert guidance, knowledge and support throughout your selling journey, so you can rest easy knowing you and your business are in safe hands.

Just 18 months after its launch, Facebook decided to buy another business and so acquired Instagram for $1billion in 2012. At the time, Instagram was a 13-person start-up with 30 million users. Now the photo-sharing app boasts over 600 million users worldwide.

 

The Creation of Instagram

After over a year of planning, Instagram was established in San Francisco by Kevin Systrom and Mike Krieger in only eight weeks. Systrom was actually offered a job at Facebook in 2004 when he was still in college however he turned it down to continue his education; looking back, who knows if it was the right decision? Instead, he got a job working for Google in their marketing department and began engineering during the evenings to help him learn to code. He then developed a prototype app called ‘Burbn’ which allowed people to check-in, post where they are, and share images with others. It was at this point that Systrom teamed up with Mike Krieger. Burbn was somewhat short-lived however, as it was realised that the app was too similar to other existing apps; although one unique aspect of the app was the photo-sharing feature. Burbn was stripped of all other elements except this feature. It was then rebranded as ‘Instagram’ which is short for ‘instant telegram’.

 

Instagram’s $1billion Acquisition

Instagram officially launched on 6 th October 2010 and 25,000 users joined in the first 24 hours, causing the system to crash; within 3 months, the app had over 1 million users. Systrom repeatedly said he didn’t feel like Facebook was a threat to Instagram, as Facebook’s mobile apps were overly complicated. However, at SXSW Systrom did say that ‘it’s Facebook level engagement that we’re seeing’, whether or not this was taken as a direct threat to Facebook is unclear although after launching on Android (after initially only being available on iOS) and gaining more than 1 million users in 24 hours, Instagram was bought by Mark Zuckerberg, CEO of Facebook, for $1billion, $300million in cash and the rest in Facebook stock.

 

After the Acquisition

After Facebook bought Instagram in 2012, the app continued to grow; by February 2013, Instagram had 100 million active users per month. The following timeline represents the app’s rapid growth since the acquisition:

February 2013: Instagram reaches 100 million active monthly users
May 2013: Instagram lets users tag other users in photos of them
November 2013: the app began offering space to advertisers
March 2014: Instagram reaches 200 million active monthly users
June 2014: Instagram launched a feature that allowed users to edit their images in more detail and included editing tools such as adjusting brightness, highlights and shadows
December 2014: the app reaches 300 million active monthly users
September 2015: Instagram ads go international, allowing businesses to advertise globally
September 2015: the app reaches 400 million active monthly users
October 2015: Instagram launches ‘Boomerang’
May 2016: Instagram unveils a fresh look including an updated app and icon design
June 2016: the app reaches more than 500 million active monthly users
August 2016: Instagram Stories is launched
November 2016: Instagram introduces live videos
December 2016: the app reaches more than 600 million active monthly users
February 2017: Instagram lets users share multiple photos in one post
June 2018: Instagram TV (IGTV) launches
July/August 2020: Instagram Reels launches

As evident by the timeline, Instagram has grown rapidly since its launch in 2010 and Facebook’s acquisition of the business in 2012; throughout the years the number of active users has continued to increase, and with the recent launch of the app’s latest feature, Instagram Reels, its swift growth looks expected to continue.

Purchasing a business launches so many different opportunities; acquiring an existing business can be a fantastic way to grow your existing revenue. If, like Facebook, you’re looking to acquire a business, don’t hesitate to contact us today where we can provide you with expert guidance and support throughout your business acquiring journey.