Facebook is one of the largest and most influential social media companies in the world. Founded by Mark Zuckerberg in 2004, Facebook has grown to over 2.8 billion monthly active users as of Q3 2022. With its massive user base and extensive data on user behavior and interests, Facebook wields enormous power and influence globally.
Given Facebook’s size and impact, it is natural to wonder – just how much money would it take to acquire Facebook? Could an individual or company even realistically buy Facebook? In this article, we will analyze Facebook’s market valuation, stock price, and other factors to estimate the amount of money required to buy the social media giant outright.
Facebook’s Market Capitalization
The most straightforward way to estimate the cost to acquire Facebook is to look at its market capitalization. Market capitalization refers to a company’s total market value – it is calculated by multiplying the company’s outstanding shares by the current share price.
As of October 2022, Facebook’s market cap stands at approximately $350 billion. This makes Facebook one of the most highly valued companies in the world, behind only Apple, Microsoft, Alphabet (Google), and Amazon. While $350 billion is an astoundingly high figure, it provides a baseline estimate for the minimum amount needed to acquire Facebook. The actual amount would likely need to be higher to convince shareholders to sell their stakes.
Facebook’s Revenue and Profits
In addition to market cap, potential acquirers would analyze Facebook’s revenues, profits, and growth prospects. For the 12 months ending June 30, 2022, Facebook reported:
- Revenue: $118 billion
- Net Income: $23.7 billion
Facebook generates enormous profits thanks to its massive user base and advertising model. Despite its size, revenues continue to grow at double digit rates each year. Any acquirer would be willing to pay a premium for Facebook based on its steady growth and high profitability.
Revenue and Net Income Over Time
| Year | Revenue | Net Income |
|---|---|---|
| 2018 | $55.8 billion | $22.1 billion |
| 2019 | $70.7 billion | $18.5 billion |
| 2020 | $86.0 billion | $29.1 billion |
| 2021 | $117.9 billion | $39.4 billion |
| 2022 (TTM) | $118.0 billion | $23.7 billion |
As seen in the table, Facebook’s revenues and profits have surged over the past 5 years. This strong financial performance gives additional justification for a premium acquisition valuation.
Facebook’s Acquisition of WhatsApp
A relevant transaction to analyze is Facebook’s own acquisition of WhatsApp in 2014. Facebook paid approximately $19 billion to acquire the global messaging platform when WhatsApp had 450 million monthly active users. At the time, the price was extremely high given WhatsApp’s very small revenue and lack of profits.
Today, WhatsApp has over 2 billion monthly active users. While some criticized the acquisition initially, Facebook likely considers WhatsApp well worth the $19 billion price tag now. This demonstrates Facebook’s willingness to pay large premiums for services with global user growth potential.
Acquisition Premium for Technology Companies
When assessing potential acquisition costs, it is also useful to look at typical acquisition premiums paid for major technology companies. Premiums paid above market capitalization reflect the synergies and potential value created by combining the target company’s assets with the acquirer’s.
Some recent large tech acquisitions and the premiums paid above market value include:
- Microsoft’s acquisition of LinkedIn for $26.2 billion in 2016 – 50% premium
- Broadcom’s acquisition of VMware for $61 billion in 2022 – 49% premium
- Adobe’s acquisition of Marketo for $4.8 billion in 2018 – 68% premium
Based on these examples, it is reasonable to assume that Facebook’s acquisition price would require a minimum premium of 50% above its current market cap. This puts the starting price well above $500 billion before factoring in additional required premiums.
Estimating Facebook’s Acquisition Price
Taking into account all of the factors we have discussed, we can establish a reasonable range for Facebook’s potential acquisition cost:
- Facebook Market Cap: $350 billion
- Minimum Premium of 50%: $175 billion
- Additional Premium for Growth Potential: $50 – 100 billion
- Total Hypothetical Acquisition Price: $575 – $625 billion
This quick valuation exercise suggests an acquirer would likely need to pay between $575 and $625 billion dollars to buy Facebook today. The final price would also be subject to negotiations and the number of interested buyers. Nonetheless, this valuation gives a rough estimate of just how much money it would take to acquire one of the largest companies in the world.
Could an Individual Buy Facebook?
Given the massive price tag estimated above, it is reasonable to wonder if an individual could realistically buy Facebook outright. The clear answer is no – the company’s enormous valuation places it firmly out of reach for even the wealthiest individuals.
For perspective, the person with the highest net worth in the world is Bernard Arnault, chairman of luxury goods conglomerate LVMH. As of October 2022, Arnault’s net worth is estimated at $138 billion. Even if he liquidated all LVMH assets and committed 100% of his net worth, Arnault could not come close to the minimum $575 billion baseline needed to acquire Facebook.
The world’s most valuable public company, Apple, is worth approximately $2.3 trillion – well over 4 times the hypothetical Facebook acquisition price. There is simply no individual with enough wealth concentrated to make this scale of acquisition possible. Buying Facebook would only be feasible for a consortium of investors or possibly a government entity. No single individual could realistically finance the purchase alone.
Which Companies Could Buy Facebook?
Given the infeasibility of an individual buying Facebook, the only potential acquirers with enough resources would be other big technology companies. The most commonly discussed suitors include:
Apple
Thanks to its nearly $2 trillion market cap and $170 billion in annual profits, Apple theoretically has the capacity to buy Facebook outright. However, Apple has never made an acquisition remotely close to this size. Antitrust concerns could also pose issues. But Apple may see strategic benefits in combining its hardware ecosystem with Facebook’s social media platforms.
Microsoft
Microsoft also has the financial might to acquire Facebook with its market cap over $1.8 trillion. Already owning professional social network LinkedIn, Microsoft could benefit from Facebook’s consumer social media dominance. However, Microsoft has focused recently on business software and cloud services over consumer products.
Amazon
With a market cap approaching $1 trillion, Amazon also has potential to absorb Facebook. Amazon’s advertising division could be significantly bolstered by combining forces with Facebook’s targeted ad capabilities. But Amazon has struggled to penetrate social media, and regulators may balk given antitrust issues facing both giants.
Alphabet
Alphabet, parent company of Google, is another tech giant that could feasibly acquire Facebook with its market cap of over $1.3 trillion. Facebook’s social media data could enhance Google’s core advertising business. But Alphabet would face tough antitrust hurdles in trying to combine two of the internet’s largest forces.
While these tech giants have enough money to potentially acquire Facebook, persuasive business rationales are harder to establish. Regulatory obstacles could also prove difficult, though not impossible, to navigate. An acquisition of this magnitude would have far-reaching implications for the tech industry landscape.
Conclusion
Facebook has established itself as one of the world’s most influential companies. Thanks to its wildly popular social media platforms, massive profits, and continued growth, Facebook would demand an enormous price tag to acquire.
Our analysis suggests that based on market cap, revenue multiples, and acquisition premiums, the cost to buy Facebook would likely fall between $575 and $625 billion. While no individual could finance such a deal, a handful of deep-pocketed technology companies like Apple, Microsoft, Amazon and Alphabet potentially have the means.
But even for mega-cap companies, acquiring Facebook would remain incredibly challenging due to regulatory scrutiny, integration risks, and the sheer enormity of Facebook’s $600 billion-plus hypothetical price. For now, an outright acquisition of Facebook remains an extremely unlikely scenario. The social media giant is poised to continue on its own as a highly independent force in the technology sector.