Discussion posts: Business Acquisition

Post 1

Amazon’s largest acquisition was the purchase of Whole Foods Market for $13.7 billion in June 2017 (Ladd, 2019). Although the purchase of Whole Foods was risky, managers, shareholders and the public have different views on the merger’s performance. From a management standpoint, it is too early to judge the success of the merger since it has been less than two years since the acquisition. Despite the possibility of failure, management appears to be optimistic about the profitability of Whole Foods due to Amazon’s competitive and strategic advantage (Ladd, 2019). From a shareholder’s point of view, there are some pros and cons to Amazon’s initiative to cut prices on food. In order to increase sales, Amazon has made efforts to reduce the price of goods, which has improved sales in recent years (Duberstein, 2018). Contrary to the improvement in sales, further reduction of Whole Foods pricing may hinder Amazon’s profit margin, which can upset shareholders (Duberstein, 2018). From a public opinion standpoint, Amazon has received some negative backlash from their no-employee business model (Perrone, 2017). As amazon attempts to replace employees with technology, many Whole Foods employees are faced with the potential of losing their jobs. Some view Whole Foods shift to automation as a threat to America’s service and retail workforce (Perrone, 2017).

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Post 2

Gilead acquired KITE pharmaceuticals in August of 2017.  Gilead has been struggling with organic growth and was looking to expand it’s drug pipeline and portfolio through this acquisition.  KITE focuses mainly on oncology while Gilead focuses mainly on infectious diseases.  Gilead paid $11.9 billion for KITE pharmaceuticals. (Gilead Acquisitions. (2017, August 28)  This is interesting because at the time of acquisition KITE only had sales of $30 million for 2017.  (Pillars of Wallstreet. (n.d.)  This is particularly interesting because it shows that Gilead is really betting that in the long term KITE’s drug development technology will pay off.  Gilead was and still is sitting on a pile of cash and investors were getting frustrated that Gilead wasn’t utilizing it so they felt pressured to make a large acquisition.

As somebody who has a direct family member in which KITE pharmaceutical’s novel potential drug pipeline might help, I think Gilead made the acquisition just to appease investors and “get them off their back” so to speak.  The treatment’s called CAR-T are not fully proven to be effective and safe.  I get a daily update on CAR-T therapy as a potential cure for cancer and it so far it doesn’t seem to do so.  However, this is also why Gilead made such a big bet on KITE pharmaceuticals is because the potential for a cure even though they don’t have much revenue at all.

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