Amazon’s Biggest Acquisitions
Published in 2013, Brad Stone’s book The Everything Store paints an ambitious and relentless portrait of Jeff Bezos, a man who is determined to create an online store that will someday be “everything to everyone”.
As prescient as this characterization was at the time, the narrative is even more relevant now – and with Amazon’s most recent acquisition of Whole Foods Market for $13.7 billion, it’s clear that no market is safe from the sprawling Bezos Empire.
The Everything Store
Today’s infographic comes to us from CB Insights and it shows how Amazon’s strategy is unfolding, as well as which acquisitions are helping in the company’s quest to become the fabled “everything” store.
While buying Zappos ($1.2B), Twitch ($970M), and Kiva Systems ($775M) were all essential to Amazon’s strategy, the price paid for these companies is minuscule in comparison to the massive $13.7 billion acquisition of Whole Foods Market.
Amazon’s Biggest Acquisitions
Here’s how each of these acquisitions is helping to fuel Amazon’s ambitions:
Amazon’s boldest move yet, buying Whole Foods signals Amazon’s goal of becoming a transcendent brand that touches every aspect of daily life. Most people need to buy groceries every week – and that gives Amazon a new and more frequent window to interact with customers.
Known for its obsessive customer service and company culture, Zappos was most likely bought by Amazon for its team.
Now re-branded as Amazon Robotics, this company specializes in manufacturing mobile robotic fulfillment systems for Amazon’s array of warehouses.
Amazon’s AWS unit has integrated Elemental’s unique mobile video technology into its cloud infrastructure services.
Thought as the “Netflix of Europe”, Lovefilm’s streaming services were re-branded as Amazon Prime Instant Video in 2014.
Amazon bought this Dubai-based retailer to improve its footprint in the Middle East – and to prevent global competitors like Alibaba and Flipkart from making inroads in the market.
Bought by Amazon in 2011, Quidsi ran six shopping sites, including Diapers.com, Soap.com and Wag.com. After a brief stint at Amazon, Quidsi founder Marc Lore left to start Jet.com – which was sold to Walmart for $3.3 billion.
Owning the leader in audiobooks was a no-brainer for Amazon, and the Audible acquisition went down in 2008.
This secretive Israeli semiconductor chip designer was snatched up by Amazon in 2015.
Amazon bought Twitch, a video game live streaming company, in 2014 when the service was flush with 55 million subscribers. Today, Twitch.tv is the 40th most visited website worldwide, and is particularly known for its broadcasts of eSports competitions.
Timeline: The Shocking Collapse of Silicon Valley Bank
Silicon Valley Bank was shuttered by regulators becoming the largest bank to fail since the height of the Financial Crisis. What happened?
Timeline: The Shocking Collapse of Silicon Valley Bank
Just days ago, Silicon Valley Bank (SVB) was still viewed as a highly-respected player in the tech space, counting thousands of U.S. venture capital-backed startups as its customers.
But fast forward to the end of last week, and SVB was shuttered by regulators after a panic-induced bank run.
So, how exactly did this happen? We dig in below.
Road to a Bank Run
SVB and its customers generally thrived during the low interest rate era, but as rates rose, SVB found itself more exposed to risk than a typical bank. Even so, at the end of 2022, the bank’s balance sheet showed no cause for alarm.
As well, the bank was viewed positively in a number of places. Most Wall Street analyst ratings were overwhelmingly positive on the bank’s stock, and Forbes had just added the bank to its Financial All-Stars list.
Outward signs of trouble emerged on Wednesday, March 8th, when SVB surprised investors with news that the bank needed to raise more than $2 billion to shore up its balance sheet.
The reaction from prominent venture capitalists was not positive, with Coatue Management, Union Square Ventures, and Peter Thiel’s Founders Fund moving to limit exposure to the 40-year-old bank. The influence of these firms is believed to have added fuel to the fire, and a bank run ensued.
Also influencing decision making was the fact that SVB had the highest percentage of uninsured domestic deposits of all big banks. These totaled nearly $152 billion, or about 97% of all deposits.
By the end of the day, customers had tried to withdraw $42 billion in deposits.
What Triggered the SVB Collapse?
While the collapse of SVB took place over the course of 44 hours, its roots trace back to the early pandemic years.
In 2021, U.S. venture capital-backed companies raised a record $330 billion—double the amount seen in 2020. At the time, interest rates were at rock-bottom levels to help buoy the economy.
Matt Levine sums up the situation well: “When interest rates are low everywhere, a dollar in 20 years is about as good as a dollar today, so a startup whose business model is “we will lose money for a decade building artificial intelligence, and then rake in lots of money in the far future” sounds pretty good. When interest rates are higher, a dollar today is better than a dollar tomorrow, so investors want cash flows. When interest rates were low for a long time, and suddenly become high, all the money that was rushing to your customers is suddenly cut off.”
|Year||U.S. Venture Capital Activity||Annual % Change|
Why is this important? During this time, SVB received billions of dollars from these venture-backed clients. In one year alone, their deposits increased 100%. They took these funds and invested them in longer-term bonds. As a result, this created a dangerous trap as the company expected rates would remain low.
During this time, SVB invested in bonds at the top of the market. As interest rates rose higher and bond prices declined, SVB started taking major losses on their long-term bond holdings.
Losses Fueling a Liquidity Crunch
When SVB reported its fourth quarter results in early 2023, Moody’s Investor Service, a credit rating agency took notice. In early March, it said that SVB was at high risk for a downgrade due to its significant unrealized losses.
In response, SVB looked to sell $2 billion of its investments at a loss to help boost liquidity for its struggling balance sheet. Soon, more hedge funds and venture investors realized SVB could be on thin ice. Depositors withdrew funds in droves, spurring a liquidity squeeze and prompting California regulators and the FDIC to step in and shut down the bank.
What Happens Now?
While much of SVB’s activity was focused on the tech sector, the bank’s shocking collapse has rattled a financial sector that is already on edge.
The four biggest U.S. banks lost a combined $52 billion the day before the SVB collapse. On Friday, other banking stocks saw double-digit drops, including Signature Bank (-23%), First Republic (-15%), and Silvergate Capital (-11%).
|Name||Stock Price Change, March 10 2023||Unrealized Losses / Tangible Equity|
|First Republic Bank||-15%||-29%|
|Fifth Third Bancorp||-4%||-38%|
|Bank of America||-1%||-54%|
Source: Morningstar Direct. *Represents March 9 data, trading halted on March 10.
When the dust settles, it’s hard to predict the ripple effects that will emerge from this dramatic event. For investors, the Secretary of the Treasury Janet Yellen announced confidence in the banking system remaining resilient, noting that regulators have the proper tools in response to the issue.
But others have seen trouble brewing as far back as 2020 (or earlier) when commercial banking assets were skyrocketing and banks were buying bonds when rates were low.
The whole sector is in crisis, and the banks and investors that support these assets are going to have to figure out what to do.-Christopher Whalen, The Institutional Risk Analyst
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