Many companies now consider acquisitions and strategic alliances in order to improve their competitiveness and long-term viability. A strategic alliance involves two companies cooperating in their production and operations to decrease expenses and boost profits (Tjemkes & Koen, 2017). An acquisition is when one firm buys another in order to improve its market strength, sustainability and negotiating power. Acquisition gives the firm complete control and ownership of the purchased company (Hill 2022). The firm should assess whether the company has the resources, synergy and market dynamics necessary to launch a collaborative strategy.
Expedia, HomeAway and other companies entered into an agreement worth $3.9 billion (Conway, 2015). Expedia provides worldwide access to its customers in many countries through an online travel platform. HomeAway.com is an American online travel agency that offers vacation rental, hotel and tourist activity services. HomeAway, which was established in 2005, has been pursuing an ambitious strategy for development to increase its brand equity worldwide and market share via acquisitions, strategic partnerships and mergers. Expedia bought HomeAway in order to consolidate the U.S. market and strengthen its brand image, as well as increase revenue and margins (Utomo and al., 2021). Expedia’s 2016 revenue was $6.6 billion. It increased to $12.1 billion after closing the deal. Figure 1. Statista Research Department, 2022. They wanted to grow their business and make it more accessible to international tourists and expatriates who are moving to different countries in order to rent accommodation or rental services. HomeAway offers options for homeowners that allow them to let out extra bedrooms in exchange for hotel or holiday accommodation.
Expedia’s rapid adoption in the market of its accommodations presented a problem for their operational viability, which included Expedia. It was seen by Expedia as a move to consolidate its market position. Expedia considered acquisition to be a strategy for increasing its hotel options as well as streamlining the offerings in order to better accommodate expanding customer bases. Dara Khorowshahyi Expedia’s CEO, stated that Expedia gave its customers better opportunities to have a positive experience with property management and travel for international travelers. Expedia bought HomeAway at $1 billion cash and shares for $2.9 billion. The price was 19% higher than HomeAway’s prior market value.