Acquisitionomics

Two months ago, Google bought YouTube for $1.65 Billion. Now that seems like a huge figure, for a startup; and with potential for litigation over copyright, many wondered whether it made sense for Google.

To quote fellow blogger Delta

Google also probably guessed that they were about to take on board a huge legal fight that would probably cost them billions more than the $1.65 billion that the company, YouTube cost them.

Here’s the reality. The acquisition was an all-stock deal; Google didn’t pay any cash, just released additional stock. Let’s take a look at Google’s stock price and market capitalization.

Early October, before the announcement, Google was trading between $400 and $425 - giving a market capitalization of between $120 to $130 billion.

Shortly after the deal was announced, the price has gone up - it’s been hovering between $480 and $513, which puts the market capitalization between $145 and $153 billion.

That’s a jump of over $25 billion - and looks like an estimation of what the market thinks Google + YouTube, i.e. the acquisition is worth.

Spend $1.65 billion to get $25 billion? Sure makes sense to me.

Of course, Google’s been buying more - Jotspot and so on. So maybe it isn’t all of the $25 billion. 5, 10, 20 - you pick your number. Even then, it sure is a heck of a deal.