Putting a Value on Synergies
Copyright Jack Mixner. 714 449 1040. www.mixnerstrategy.com
EBay buys Skype for $2.6 billion in 2005. It just paid an additional $530 million based upon performance. Claims initially said EBay would profit by increasing fees for services and additional traffic its auction and payments services (Hansell). Synergy was supposed to pay.
Skype hasn't grown. No way is it worth more than $3 billion.
What went wrong?
- New revenues weren't there.
- The synergies just didn't pan out.
The message? Be very careful what you buy, especially when it supposed to result in synergies and increased revenues.
References
Hansell, Saul. EBay's $4 Billion Lession in the Value of Hype. New York Times. 1 October 2007. http://bits.blogs.nytimes.com/2007/10/01/ebays-4-billion-lesson-in-the-value-of-hype/index.html?hp