Product details

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.
Published by: Harvard Business Publishing
Originally published in: 2009
Version: 27 June 2011
Revision date: 24-Aug-2011
Length: 27 pages
Data source: Field research

Abstract

On 17 July 2009, Zappos.com, a privately-held on-line retailer of shoes, clothing, and other soft line retail categories, learned that Amazon.com, a USD19 billion multinational on-line retailer, had won its Board of Directors' approval to offer to merge the two companies. Amazon had been courting Zappos since 2005, hoping a merger would enable Amazon to expand and strengthen its market share in soft line retail categories. While Amazon's interest intrigued Zappos' senior executives, they had not felt the time was right, until now. Amazon's offer - 10 million shares of stock (valued at USD807 million), USD40 million in cash and restricted stock units for Zappos' employees and a promise that Zappos could operate as an independent subsidiary - was on the table. Zappos' financial advisor, Morgan Stanley, estimated the future equity value of an IPO to be between USD650 million and USD905 million; this estimate skewed the Amazon offer - at least in financial terms - toward the high end of Zappos' estimated market value. Hsieh and Lin, Zappos' CEO and COO respectively, knew that much of Zappos' growth, and hence its value, had been due to the company's strong culture and obsessive emphasis on customer service. In 2009, they were focusing on the three C's - clothing, customer service and company culture - the keys to the company's continued growth. Hsieh and Lin had only a few days to consider whether to recommend the merger to Zappos' board at their July 21st meeting.
Size:
USD1 billion, >500 employees
Other setting(s):
2009

About

Abstract

On 17 July 2009, Zappos.com, a privately-held on-line retailer of shoes, clothing, and other soft line retail categories, learned that Amazon.com, a USD19 billion multinational on-line retailer, had won its Board of Directors' approval to offer to merge the two companies. Amazon had been courting Zappos since 2005, hoping a merger would enable Amazon to expand and strengthen its market share in soft line retail categories. While Amazon's interest intrigued Zappos' senior executives, they had not felt the time was right, until now. Amazon's offer - 10 million shares of stock (valued at USD807 million), USD40 million in cash and restricted stock units for Zappos' employees and a promise that Zappos could operate as an independent subsidiary - was on the table. Zappos' financial advisor, Morgan Stanley, estimated the future equity value of an IPO to be between USD650 million and USD905 million; this estimate skewed the Amazon offer - at least in financial terms - toward the high end of Zappos' estimated market value. Hsieh and Lin, Zappos' CEO and COO respectively, knew that much of Zappos' growth, and hence its value, had been due to the company's strong culture and obsessive emphasis on customer service. In 2009, they were focusing on the three C's - clothing, customer service and company culture - the keys to the company's continued growth. Hsieh and Lin had only a few days to consider whether to recommend the merger to Zappos' board at their July 21st meeting.

Settings

Size:
USD1 billion, >500 employees
Other setting(s):
2009

Related