M&A WAR STORIES - The Good, The Bad and The Ugly
EBAY'S DISASTROUS AND COSTLY ACQUISITION OF SKYPE
June 03, 2021
Robert Heaton & Toby Tester
Robert and Toby continue to unpack some of the most disastrous M&A deals in corporate history. This week it's EBay's costly and disastrous acquisition of Skype. Her's the dot-points.
- Ebay thought it could leverage Skype to provide a voice and video channel for its customers and sellers to communicate. What they didn't do was talk to their customers, because they would have learned that EBay customers want anonymity and were perfectly happy with messaging and email communication - and they still are today!
- For whatever reason, EBay paid $2.3Bn for what was a $7M start-up in 2005 and then had to write down $1.4Bn over the course of its ownership of Skype
- A serious error by their legal team made sure that the deal went through without the underlying software that was the foundation of Skype - that was still in the hands of the developers post deal!
- And to top it off, there were the usual cultural clashes that occur when you try and marry a large conservative corporate with an agile, innovative start-up. And that resulted in Skype's leadership team during over 4 times during EBay's ownership
So there you go. Several ingredients to create a recipe for disaster.
The final outcome is that EBay sold Skype off to Microsoft in 2015 for approx $600M and under Microsoft, maybe Skype can re-live its core expertise and carve out a slice of the VOIP market?
But just consider this. Zoom did not come into existence until 2011, so Imagine what Skype might look like today if EBay had not made this disastrous acquisition. Food for thought?