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Introduction
Synergy is often referred to as the underlying motive for a merger or an acquisition of a smaller company by a larger one (Anderibom and Obote 99). The concept of synergy refers to the interaction of specific characteristics of two or more organizations in such a manner that the combined effect is greater than the sum of these respective traits operating independently in these organizations (99-100). When Apple acquired Beats Electronics in 2014 for $3 billion, that synergistic effect appeared to be the motive of the corporate action as far as official statements issued before, during, and after the closing of the deal occurred (Neumayr and Joyce n. p.; Kosner n. p.). This short essay explores the Beats Electronic acquisition and the synergistic outcome resulting from it in terms of revenue and cost based on readily accessible information.
The Acquisition of Beats Electronics
Beats Electronics offers two business lines that singled themselves out in their respective markets. The subscription-based streaming music service of Beats Music delivers perfectly timed and selected music personalized to consumer tastes in a manner highly convenient to Apple product and service customers. It became a reliable and choice brand in the music and sports worlds, turning into a part of the U.S. pop culture in only five years after Beats started operations (Neumayr and Joyce n. p.). Meanwhile, the Beats accessories line are the No. 1 in the premium headphone market, tailoring headphones for music superstars, such as Lady Gaga and Nicki Minaj. Beats is a fount of digital innovation and musical passion (Neumayr and Joyce n. p.).
Synergy Outcomes on Revenue and Cost
The Beats acquisition was a product and service synergy in waiting. Beats significantly enhances the Apple music database from free streaming in iTunes Radio to a world-class subscription-based service (Neumayr and Joyce n. p.). This synergistic effect is expected. However, the level of synergy in terms of revenue and cost will be difficult to determine for outsiders, particularly when such information is not usually reported in annual reports, which is exactly the case with Apple. For instance, although the acquisition of Beats Music inevitably broadened up the Apple Music library database using the Beats Music database, it will be impossible to determine with certainty how much of the Beats music database are sold through iTunes or App Store compared with the pre-acquisition Apple database music (Kosner n. p.). Measuring numerically the synergy will be technically impossible to perform by outsiders and third party researchers. And yet it is clear and commonsensical that the new Apple Music library already contains the Beats music database. Moreover, the 99c song model used in iTunes and App Store represents already a synergistic pricing of Apple-Beat music database the proportion of which cannot be established without insider data (Kosner n. p.). And yet the acquisition presupposed music database unification into the unlimited access Apple Music library (Apple 3).
Conclusion
Despite the pessimistic estimations of the agency theory (Anderibom and Obote 98) and the deconcentration theory (96) over the synergistic effect of merger and acquisition, the Apple acquisition of Beats Electronics proved to be expectedly synergistic to the service capacity of Apple’s iTunes and App Store and even an unlimited access to the Apple Music library.
Works Cited
Anderibom, A.S. and C. O. Obote. “The Effects of Mergers and Acquisitions on the Performance
of Commercial Banks in Nigeria: Evidence from United Bank for Africa (UBA) Plc.” International Journal of Education and Research, Apr. 2015, 3 (4): 93-112.
Apple. Apple Inc. Form 10-K (Annual Report). Cupertino, CA: Apple Inc., 2015. PDF file.
Kosner, A.W. “Beats Music Acquisition Gives Apple a Way Out Of The iTunes and App Store
Traps.” Forbes, May 29, 2014. Web. <http://www.forbes.com/sites/anthonykosner/2014/05/29/beats-music-acquisition-gives-apple-a-way-out-of-the-itunes-and-app-store-traps/#45f91c427a1f>
Neumayr, T., and S. Joyce. “Apple to Acquire Music & Beats Electronics.” Apple Press Info,
May 28, 2014. Web. <https://www.apple.com/pr/library/2014/05/28Apple-to-Acquire-Beats-Music-Beats-Electronics.html>
