Purple Knights

Boris Logvinskiy

Economics

Daxiang Xu

Business

Bernard Low

Computer Science

Shu Yang Quek

Computer Science

Merger and Acquisition

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Google Acquisition of YouTubeYouTube was sold for 1.65 billion dollars, stock for stock. Sequoia Capital received approximately $495 million which translates to the 30% ownership that Sequoia had in YouTube before the acquisition.

Google integration plans for YouTubeYouTube will be operated as a separate entity from Google with all of the employees staying on.

In order to monetize YouTube, Google will introduce it’s ad-based services on YouTube. Moreover, Google will include their search algorithm for video searching and indexing on YouTube.

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Google’s reasons for buying YouTube

Picture taken from Alexa.com

Google acquired YouTube not for it’s technology, which they can easily replicated, but for its social networking aspects and its 72 million user base

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YouTube’s Criticisms prior to acquisition

Lack of business modelYouTube did not have a concrete plan to monetize itself and had not made profits since it’s interception.

Copyright issuesYouTube had copyrighted content on its site, which opened it up to risk of being sued by media companies, much like Napster was.

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Benefits for both parties

Google YouTube

Benefits

• Traffic

• Established brand

• Broader advertising base

• Strengthen foothold in online video industry

• Capital

• Technology

• Profitable business model

• Engineers

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Risks and mitigation for both partiesGoogle YouTube

Risk

• Copyright issues and potential lawsuits

• Acquisition might cost investors’ confidence in Google

• Decrease in Google share price can reduce actual realizable value of the amount paid

• Loss of autonomy

Mitigation

• 12.5% of stock to be paid put in escrow

• Investors’ confidence not as important because of corporate structure

• Can employ hedging options to control for downside

• Provision in contract for YouTube to be a separate entity