Walmart (tkr: WMT) can do better than to jointly acquire TikTok with Microsoft (tkr: MSFT). A TikTok acquisition is fraught with risk. Our preference would be for Walmart to acquire a leading retailer in a growing category. AutoZone (tkr: AZO) is one such example.
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One of the first things you learn after completing an acquisition is that you as the acquirer can add far more value to the acquired company if you understand the acquired company’s business at a granular level. It is far easier to have gained this understanding by way of first-hand operational experience than to try to learn it on the fly during the M&A due diligence process. Walmart has a fundamental understanding of Retail. It does not have a fundamental, first-hand understanding of the social media business and its unique challenges (even considering would-be M&A partner Microsoft’s experience given its 2016 LinkedIn acquisition). Walmart and WMT shareholders would be better off long-term if the company would focus on growing its Retail footprint organically and through acquisitions rather than pursuing acquisitions that operate outside of its field of expertise.