Merger

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FEDEX CORP & SHOPRUNNER MERGER 1 FedEx Corp & ShopRunner Merger Columbia Southern University FIN 6301 Corporate Finance Dr. Keith A. Wade Introduction
FEDEX CORP & SHOPRUNNER MERGER 2 In December 2020, FedEx Corp. announced its plan to acquire ShopRunner Inc. for an undisclosed amount. The merger of these two companies aims to combine FedEx's global logistics capabilities with ShopRunner's e-commerce platform to provide a seamless end-to-end e-commerce solution for businesses and consumers. FedEx Corporation is a multinational delivery services company founded in 1971, headquartered in Memphis, Tennessee, USA. FedEx operates in more than 220 countries and territories, providing transportation, e-commerce, and business services. FedEx is known for its overnight shipping and logistics services and has a workforce of over 500,000 employees worldwide (FedEx, 2023). ShopRunner Inc. is an e-commerce platform that provides its customers with free two- day shipping, free returns, and other exclusive deals at participating retailers. ShopRunner was founded in 2010 and is headquartered in Chicago, Illinois, USA. ShopRunner has partnerships with over 100 retailers, including Neiman Marcus, Saks Fifth Avenue, and Under Armour ( Pivotal Sources, 2020). The merger of FedEx and ShopRunner helped both companies expand their businesses in the e-commerce industry. With the growth of online shopping, FedEx plans to enhance its e- commerce capabilities by integrating ShopRunner's technology and services into its operations. ShopRunner's platform will also benefit from FedEx's global logistics network, providing faster and more efficient shipping and delivery services to its customers. Overall, the merger of FedEx and ShopRunner created a more comprehensive e- commerce solution for businesses and consumers, leveraging the strengths of both companies to provide a seamless end-to-end e-commerce experience. Financials
FEDEX CORP & SHOPRUNNER MERGER 3 Based on the information provided, FedEx's acquisition of ShopRunner was relatively small in terms of its impact on the company's overall financial performance. The fact that the financial results of ShopRunner were not material to FedEx's results of operations suggests that ShopRunner's revenue and earnings were likely not significant relative to FedEx's overall revenue and earnings. The majority of the purchase price allocated to goodwill and intangibles suggests that FedEx expects the acquisition to provide long-term strategic benefits, such as increased customer loyalty and expanded capabilities in the e-commerce space. The lack of pro forma financial information may make it more difficult for investors to assess the impact of the acquisition on FedEx's financial performance. Pro forma financial information would have provided investors with an estimate of FedEx's financial results if the acquisition had been in place for the entire fiscal year (FedEx Corp, 2022). However, given the relatively small acquisition size, the lack of pro forma financial information may not be a significant concern for most investors. Risk The merger of ShopRunner and FedEx, announced in November 2020, involved significant risks that both companies needed to evaluate and address to ensure the merger's success carefully. Below are some potential and actual risks that occurred during the merger, as well as some possible strategies that were implemented to mitigate these risks: 1. Cultural Differences: When two companies with different cultures merge, it can create significant challenges. In this case, ShopRunner is a startup that values innovation, while FedEx is a more established company that values stability. As a result, there may be tensions between the two companies.
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FEDEX CORP & SHOPRUNNER MERGER 4 Mitigation: The companies conducted cultural assessments and developed a plan to integrate the two cultures. They created a culture committee to identify and address potential conflicts (FedEx, 2020). 2. Integration Challenges: The merger requires seamless integration of the two companies technology, processes, and systems. Data loss and operational disruptions are risky if the integration process is not appropriately managed. Mitigation: The companies developed an integration plan prioritizing data security and business continuity. They tested the integration plan before implementation and allocated additional resources to address any challenges. 3. Market Risk: The merger requires both companies to work together to compete with other e-commerce players such as Amazon and Walmart. If the combined company cannot compete effectively in the market, it may lead to significant losses. Mitigation: The companies conducted a thorough market analysis and developed a competitive strategy. They identified potential growth areas and invested in new products and services (FedEx, 2020). 4. Regulatory Risk: The merger may face regulatory scrutiny from antitrust agencies, particularly in the United States. Mitigation: The companies conducted a regulatory risk assessment and developed a plan to address potential antitrust concerns. They engaged with regulators early in the process to minimize regulatory risk. Overall, the merger of ShopRunner and FedEx presents significant risks. The companies mitigated most of these risks by conducting thorough assessments, developing a detailed integration plan, and engaging with regulators and stakeholders early in the process.
FEDEX CORP & SHOPRUNNER MERGER 5 Human Capital FedEx’s acquisition of ShopRunner in 2020 was a significant strategic move for both companies. In terms of human capital management, there are several aspects to consider. Firstly, it's worth noting that ShopRunner had an impressive track record in attracting and retaining top talent. The company's CEO, Sam Yagan, had previously co-founded several successful startups, including OkCupid and SparkNotes, and was well-respected in the tech industry (The University of Chicago, 2023). ShopRunner had also built a strong team of experienced executives and engineers passionate about the company's mission. In the acquisition, FedEx recognized the value of ShopRunner's human capital and tried to retain key personnel. FedEx announced that it would retain the ShopRunner team to operate and grow the ShopRunner platform (ShopRunner, 2020). This is a good sign that FedEx understands the importance of maintaining the talent instrumental in making ShopRunner successful. Another aspect of human capital management to consider is integrating the two companies. Integration is a crucial phase in any acquisition, and it's vital to ensure that employees from both companies feel valued and included. FedEx has stated that it plans to integrate ShopRunner into its operations. One potential challenge in integrating the two companies is the cultural differences between FedEx and ShopRunner. FedEx is a large, established corporation with a strong hierarchical structure, while ShopRunner is a smaller, more agile company that operates more like a startup. It will be important for FedEx to recognize and respect these differences to ensure a successful integration.
FEDEX CORP & SHOPRUNNER MERGER 6 FedEx seems to have made a reasonable effort to manage the human capital aspects of the ShopRunner acquisition. By retaining the ShopRunner team and recognizing the importance of integration, FedEx has set itself up for success in the years to come. However, only time will tell how well the integration will go and whether the two companies can work together effectively to achieve their shared goals. Financial Policies FedEx's acquisition of ShopRunner has implications for several of its financial policies. Firstly, the acquisition will impact the company's capital structure, as the $228 million cash payment will likely increase its debt levels. FedEx needed to consider its debt covenants and ensure that its debt-to-equity ratio remained at an acceptable level (Brigham & Ehrhardt, 2019). Secondly, the acquisition may affect FedEx's dividend policy, as the company will need to consider the impact of the acquisition on its cash reserves and future cash flows. If the acquisition significantly affects the company's financial position, FedEx may need to re-evaluate its dividend payout ratio (Brigham & Ehrhardt, 2019). Thirdly, the acquisition of ShopRunner may impact FedEx's enterprise risk management policies. The company will need to carefully consider the risks associated with the acquisition, such as potential integration challenges and changes in the competitive landscape. FedEx may need to adjust its risk management framework to account for the new risks associated with the acquisition (Brigham & Ehrhardt, 2019). Overall, the acquisition of ShopRunner has implications for several of FedEx's financial policies, including its capital structure, dividend policy, and enterprise risk management framework. By carefully managing these policies, FedEx can work to ensure that the acquisition
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FEDEX CORP & SHOPRUNNER MERGER 7 generates long-term value for shareholders and enhances its position in the global logistics market. Synopsis This article discusses the acquisition of the e-commerce platform, ShopRunner, by FedEx Corporation in December 2020. The acquisition aimed to combine FedEx's global logistics capabilities with ShopRunner's e-commerce platform to provide an end-to-end e-commerce solution for businesses and consumers. The financials of the acquisition suggest that the impact on FedEx's overall financial performance was small, and the majority of the purchase price was allocated to goodwill and intangibles, indicating that FedEx expects long-term strategic benefits from the acquisition. The article also discusses the potential risks involved in the merger, including cultural differences, integration challenges, market, and regulatory risks, and how the companies worked to mitigate these risks. The article highlights the importance of human capital management in the acquisition, including the value of retaining top talent and integrating employees from both companies. References Pivotal Sources . (2020, December 28). Retrieved from FedEx Completes Acquisition of ShopRunner, Expanding its E-Commerce Capabilities: https://link-gale-
FEDEX CORP & SHOPRUNNER MERGER 8 com.libraryresources.columbiasouthern.edu/apps/doc/A646853700/ITOF? u=oran95108&sid=ebsco&xid=e3660a11 Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (16th ed.). Retrieved from https://online.vitalsource.com/books/9781337909730 FedEx. (2020, December 28). FedEx Completes Acquisition of ShopRunner, Expanding its E- Commerce Capabilities . Retrieved from newsroom.fedex.com/: https://newsroom.fedex.com/newsroom/global/fedex-completes-acquisition-of- shoprunner-expanding-its-e-commerce-capabilities FedEx. (2023). 2022 Annual Report. Memphis: FedEx. FedEx Corp. (2022). 2021 Annual Report. Memphis: FedEx Corp. ShopRunner. (2020, December 28). FedEx Completes Acquisition of ShopRunner, Expanding its E-Commerce Capabilities . Retrieved from ShopRunner: https://medium.com/shoprunnerblog/fedex-completes-acquisition-of-shoprunner- expanding-its-e-commerce-capabilities-50c1ebeb4368 The University of Chicago. (2023, March 13). Polsky . Retrieved from https://polsky.uchicago.edu/people/sam-yagan/