In 2014, Facebook acquired WhatsApp in a deal worth $19bn. However, more than two years later, the social media giant has been accused of providing EU regulators with misleading information during its takeover of the mobile messaging service.
Europe’s main regulator, the European Commission, has stated that it is investigating whether Facebook withheld information regarding its ability to siphon data from WhatsApp. If the investigation confirms what the Commission suspects, Facebook could be dealt a fine of up to one per cent of its turnover. Considering that the company brought in $18bn in revenue in 2015, the fine could be as large as $180m. Facebook has been given until the end of January to respond to the European Commission’s statement of objections, and if a fine is imposed Facebook can appeal the decision to the European Court of Justice.
While the outcome of the investigation will not have an impact on the merger itself, being dealt such a hefty fine would come as an extreme setback for Facebook. A spokeswoman for Facebook commented on the company’s confidence in the investigation confirming that the company has “acted in good faith”, and while it is likely that the company’s actions have not been deceptive in nature, the investigation highlights the need for transparency and clear communication throughout the M&A process.
Companies are obliged to provide investigating regulators with accurate information throughout the M&A process and this is something that businesses should take extremely seriously. We are now in a world powered and driven by data, and as a result companies must be completely clear about how they intend to use this data, particularly when it comes to M&A. In the case of Facebook it is not yet known whether information was intentionally withheld, but the penalties could be severe if the outcome of the investigation falls against the social media giant.
Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.