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Why did Zappos sell to Amazon for only about 1x sales?

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Companies are valued based on profits (or expected future cash flows), not on sales. Zappos had 2008 EBIDTA of approximately $48 million, so the acquisition price was based on a multiple of about 18x EBITDA, using Amazon's stock price when the deal was closed. read more

Plus, buying Zappos helped Amazon eliminate some serious online-shoes competition without any regulatory hurdles because the Amazon's shoe business at the time was probably of negligible size. This helps raise overall online shoe prices for both Amazon and Zappos as they each eliminate their #1 online competitor. read more

December 2007: Zappos sells $100 million worth of merchandise in a month, ending the year with sales of $840 million and, for the first time, a profit. April 2009: Hsieh meets Bezos in Seattle and talks about happiness. Bezos says he is willing to let Zappos operate independently. Negotiations ensue. November 2009: Amazon buys Zappos for $1.2 billion. read more

Back when Amazon bought Zappos for a little over a billion dollars, it left a lot of people scratching their heads. Zappos had been growing like gangbusters, gettings tons of positive attention, in part due to its obsessive commitment to over delivering on customer service, as well as its unique and creative management practices. read more

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