Ravi Madhavan's A&D Blog

Google's challenges ahead with Motorola Mobility

Now that Google's acquisition of Motorola Mobility is formally complete, there's greater discussion of the challenges ahead - broadly, how to meld the relatively low-margin hardware business with Google's high-margin Search/ Advertising model. BusinessWeek takes an in-depth look.

Warren Buffett's media move

Interesting deal - in its second transaction in the media space within six months, Buffett's Berkshire Group bought a portfolio of 60+ newspaper properties from Media General. NYT story here. From what we know about Buffett, it's unlikely he's betting on creating value via a technology upgrade (e.g., by evolving the local newspapers into the world of "new media.") Berkshire Hathaway's acquisition criteria are listed here. Is this a "last iceman" strategy? Or merely a reflection of a personal bias? Excerpt from the same NYT story.

The billionaire has often reminisced about being a paperboy in his youth — a newspaper tossing competition featuring Mr. Buffett and his friend Bill Gates was one of the highlights of the investor meeting — and waxes nostalgic about the decline of newsprint.

 

Why would Delta Airlines buy an oil refinery?

Reuters has two separate analyses of Delta's (on the surface, rather surprising) decision to buy an oil refinery. This one discusses some reasons why it might actually makes sense (key: the closure of the Trainer plant may jeopardize jet fuel supply to the three major NYC area airports, which together account for 7% of Delta flights), while this one discusses the seemingly dismal state of the refinery business (poor profits driving closures).

Inside look at Private Equity

BusinessWeek covers a key aspect of private equity: its focus on making companies more efficient.

Google/ Motorola Mobility

WSJ has some analysis on Google's Motorola Mobility acquisition. Definitely worth a read, as it brings up some of key issues surrounding which pieces of Motorola Mobility might make sense for Google.

Amazon/ Kiva

Amazon's acquisition of robotics firm Kiva Systems (NYT DealBook story here) is a bit of a head-scratcher! Granted, Amazon relies on Kiva Systems' automation in its warehouses, and more broadly, warehouse automation is likely  a growth segment worldwide. (Earlier this month, I visited a fully automated warehouse in Sao Paulo, Brazil - at cosmetics firm Natura's main facility.) But why would Amazon need to buy its supplier of warehouse robots? As this Breakingviews entry put it, "it’s not obvious that Amazon needed to buy the cow when it could just purchase the milk." I'm not sure what Kiva Systems' financial and managerial strengths/ weaknesses were, but could this have been a bailout of a strategic supplier?

Groupon/ Hyperpublic

NYT DealBook report on Groupon's purchase of Hyperpublic here. Excerpt:

Mr. Cooper said he could not speak specifically about Groupon’s future plans for Hyperpublic. But he noted that figuring out how local markets work and using public information from the social Web to understand consumer habits and interests is becoming a hot area for many companies. It’s not hard to imagine that Hyperpublic would be able to help Groupon better target subscribers in some of its coming products, including Groupon Now, a service that lets users see deals happening in real time, based on their location. It’s also an area that companies like Foursquare, Facebook and Google are widely thought to be eying as they continue to develop their mobile advertising strategies.

“The market that we’re playing in is one that Foursquare and Google are playing in,” Mr. Cooper said. “The better Groupon understands the people and local environment that they are trying to drive traffic to, the better they will do.”

 

Daydreaming about RIM

RIM shares have seen some movement over the last couple of days, following news about potential takeover interest from Amazon, Microsoft/ Nokia, etc. (NYT DealBook article here.) 

It struck me that a potential deal to drill down into would be Apple buying RIM. (See one analysis from SeekingAlpha here.) In such a scenario, the key resource would be the RIM network, not the BlackBerry handsets business (which latter could be spun off, in the process ameliorating anti-trust issues). Apart from its commanding position in the consumer space, it's clear that the iPhone is making significant inroads into the corporate market. Mobile computing on the iPad is also quite hot among large corporations worldwide, from all indications. Buying RIM would facilitate the bundling of Apple's tools with RIM's trusted network (assuming no tech incompatibilities) so that Apple can make a big push into the corporate space. Intriguing...Steve Jobs would clearly not have done this, but what about Tim Cook?

Nice illustration from the M&A strategy playbook

Carl Icahn's offer to buy metals recycler Commercial Metals Company (NYT DealBook report here) is an exemplar of what often happens in M&A, displaying features such as the search for scale (combining target with prior acquisition) and a multi-track approach (offer to management with the implied threat of a proxy fight if rebuffed).

Google did 57 deals this year

For a total of $1.4B in the first nine months of the year, Including Zagat but not Motorola Mobility (which is yet to close), according to NYT DealBook.