Lessons to be learned from the rumored Target acquisition

In our last post, we highlighted the potential for 2018 to be another banner year for mergers and acquisitions. The new tax reform bill will potentially free up cash for companies to make acquisitions to strengthen their place in the marketplace and to put them in strategic positions for future growth. But as we have noted in a number of our posts, a major corporate purchase must make sense for both entities involved.

A prime example is the rumored purchase of retailer Minneapolis based Target by online retailing giant Amazon. In the past few years, Amazon has purchased Whole Foods to increase its presence in the fresh food delivery marketplace, and the same occurred with its acquisition of Zappos with regard to delivering shoes and apparel in an efficient manner. 

Given Amazon’s penchant for acquiring companies it can see as partners, the potential for buying Target raises eyebrows and raises concerns in the eyes of some analysts. For instance, some question whether Target actually offers anything that Amazon already does already.

After all, Target sells a large majority of what Amazon already efficiently provides to consumers with regard to apparel, household essentials and furniture, and Amazon certainly does not want to duplicate sales and cannibalize its own market share. Additionally, Target’s struggles have been in the fresh food market, and Amazon already has that covered through its purchase of Whole Foods.

It remains to be seen whether a Target-Amazon marriage will actually come to fruition, but it serves as a cautionary tale to businesses seeking to acquire and integrate a smaller company into its operations. 

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