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Twitter (TWTR) May Find a Taker; Alphabet Seeks M&A Advice

Per media reports, Twitter Inc. TWTR still holds the interest of Alphabet Inc. GOOGL. The search giant seems keen on snapping up Twitter and is now taking financial advice to evaluate the buyout.

Though there has been no official word on the matter from the involved parties, it has been widely reported that Alphabet has sought services of Lazard Bank to evaluate the feasibility of the acquisition of Twitter. In September this year, Lazard Bank solicited Alphabet in the $625 million buyout of San Jose-based Apigee, a leading provider of application programming interface (API) management tools. 

Alphabet has long been viewed as the most potential buyer given its diverse platforms that could make the integration of Twitter easy. Also, both the companies have an arrangement whereby tweets appear on Google’s search engine results page. Also, Twitter’s DoubleClick advertising service is integrated with Google platform.

However, in the last few days, apart from tech behemoths like Facebook and Microsoft, several other names have cropped up including that of salesforce.com, inc. CRM and media giant The Walt Disney Company DIS. However, these rumors haven’t gathered much steam so far.

Apparently, after much dilly dallying, Twitter has reportedly sought help from Goldman Sachs Group Inc. and Allen & Co. to assist it in finding suitable buyers. Last month, co-founder Evan Williams, while talking to Bloomberg TV, said that "We’re in a strong position now, and as a board member we have to consider the right options” when asked about Twitter’s standalone status. However, the critical board meeting that followed next opted not to discuss sale. Instead, the Jack Dorsey-led team bargained for some more time to “turn things around”.



However, investors are done with waiting as a turnaround remains elusive as ever. Despite being an incredibly strong brand, Twitter isn’t finding users. Sales are decelerating and it continues to report losses. Trolling on the platform is another menace that needs stricter dealing. Though “Live” and efforts to make the platform user friendly are headed in the right direction, these haven’t had a positive impact on financials.

Twitter appeals to buyers for the vast amount of data that it collects from its 300 million plus users that can be leveraged by many companies. However, apart from the abovementioned issues, analysts are of the opinion that the search for a prospective buyer has been made difficult by the company’s hefty price tag. Per reports, a potential acquirer needs to shell out over $16 billion for Twitter based on the multiple used by Microsoft to acquire LinkedIn for $26 million earlier this year. Reduction in workforce and divestment of subsidiaries like Vine and MoPub might increase its appeal to buyers.

At present, Twitter caries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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