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Amazon’s $1.2 bn Acquisition of Zoox

By Aman Singla (New York University) and Itai Almogy (Yale University)


Overview of the deal

Acquirer: Amazon

Target: Zoox

Total Transaction Size: $1.2bn

Closed date: N/A

Target advisor: Qatalyst Partners

Amazon, one of the world’s biggest industry disruptors, has agreed to pay roughly $1.2 bn for Zoox, which is a developer of autonomous vehicles. Zoox had raised $1 bn of VC capital, reaching a post-funding valuation of $3.2bn before the acquisition, which makes this deal extremely lucrative for Amazon.

Over the years, Amazon has invested in a variety of self-driving auto startups, such as Aurora Innovation and Rivian Automotive. But this is the company’s first acquisition in the space. Amazon likely acquired Zoox to increase automation in its distribution network, particularly the “last mile” delivery service. This should drive operational efficiencies, scale and eventually result in substantial cost savings across their distribution network.

Amazon's goal is to drive the costs of shipping as close to $0 as possible. Their most significant expense is employee costs. The more that can be automated, the cheaper for Amazon and cheaper for consumers. Fully autonomous, electric delivery systems reduce their cost structure significantly.

“This acquisition solidifies Zoox’s impact on the autonomous driving industry...We now have an even greater opportunity to realize a fully autonomous future” — Aicha Evans, Zoox CEO

Company Details: Zoox

Zoox is a pre-revenue mobility-as-a-service startup aiming to disrupt ground transportation through the introduction of an electric, self-driving fleet of cars. The company aimed to introduce a competing ride-hailing service to industry giants Uber and Lyft.

Founded in 2014 by Tim Kentley-Klay and Jesse Levinson

Headquartered in Foster City, California

CEO: Aicha Evans

Number of employees: 900

EV: ~$3.2 bn (as of last fundraising round in 2018)

LTM Revenue: N/A


LTM EV/Revenue: N/A


Company Details: Amazon

Amazon is an American global e-commerce and cloud computing titan. It is currently valued as the 3rd largest corporation in the world, with a market capitalization in excess of $1.4T. Having begun as an online bookstore in 1995, Amazon now reigns in a multitude of spaces through their trademark e-commerce business, Amazon Web Services, subsidiary Whole Foods (acquired for $13.7 bn in 2017), streaming service Twitch, and more.

Founded in 1994, headquartered in Seattle, Washington

Founder & CEO: Jeff Bezos

Number of employees: 935,000 as of April 30th, 2020

Market Cap: $1.48T (as of 17/07/2020)

EV: $1.51T

LTM Revenue: $296.3 bn

LTM EBITDA: $36.3bn

LTM EV/Revenue: 5.1x


Short-term consequences

It is quite unlikely that Zoox’s finished product will be introduced to the market within the next year. Prior to the announcement of the acquisition, Zoox was reportedly burning through more than $30mm per month without producing revenue and the company was set to run out of capital by July 2020. Having raised more than $500mm at a $3.2 bn post-money valuation in July 2018, Zoox proceeded to fire co-founder & CEO Tim Kentley-Klay in August 2018 for undisclosed reasons. Since then, progress appears to have stalled as Zoox had planned for commercial release to occur in 2020 - a timeline which no longer appears realistic - and Amazon was able to acquire the company at a very significant discount relative to the last round.

The e-commerce giant placed a premium on acquiring Zoox’s key employees. Amazon allegedly produced two priority lists of Zoox employees, requiring all from the first list and nineteen from the second list to stay in order for the deal to close, as well as approximately 90% of employees from the non-priority lists. Co-founder and CTO Jesse Levinson has been given a 3-year retention vesting schedule. Additionally, a $125mm cash pool and $100mm pool of Amazon restricted stock units have been kept as reserves for Zoox employees who have been retained.

With Amazon’s financial support, Zoox will be well-funded in pursuit of its self-driving mission. As this tech titan ventures into the industry (the acquisition places Amazon in competition with Alphabet’s subsidiary Waymo), further investment in smaller, independent self-driving players may significantly subside.

Amazon’s investment will likely have minimal payoff in the next 12 months. However, in the long term, it could have a massive return on investment if Amazon is able to use Zoox vehicles to further automate their shipping and logistics operations, as well as generating an additional revenue stream through ride-hailing and/or vehicle sales.

Long-term Upsides

Amazon's reputation as an industry disruptor and its recent acquisition of Zoox along with its investment last year in a $530m Sequoia-led Series B for Aurora, could be a glimpse into their future to compete with autonomous vehicle companies like Waymo. The autonomous vehicle industry is expected to be worth $126.8 bn by 2027 at a whopping CAGR of 39.6% through the growth of mobility tech, sale of vehicle software, sensors and other hardware. Initial stages of growth have already been seen in this industry in 2020 as investments in Q1 have reached a record $3 bn despite the timeline being severely impacted by COVID-19.

Amazon is expected to allow Zoox to operate as an individual business in order to pursue and continue to develop its “robo-taxis”. However, with access to Amazon’s deep pockets Zoox can accelerate their process which, if integrated well, will already have an organized system in place to manufacture and utilize their autonomous vehicles in an optimal manner. The synergies between the companies will continue to grow as these automated vehicles have the potential to bring down Amazon’s logistics expenditure. Amazon spends a massive amount of money on shipping and fulfillment, totaling $78.1bn in 2019. These costs are expected to push past $90 bn dollars in the coming years and may reach that mark in FY2020 given the quarantine-fueled surge in e-commerce. Zoox’s technology has the potential to improve Amazon’s operating margins and reduce their overall costs by $20-30 bn per year in the future. In comparison, the $1.2 bn paid for Zoox seems inconsequential. Therefore, investing in the growth of their assets by developing an efficient alternate system for distribution and delivery of products and services will help Amazon manage its future growth in a more organized manner.

Risks and Uncertainties

The autonomous vehicle industry has seen numerous consolidations and acquisitions in the past few years. In 2019, Argo AI closed a $2.6 bn deal with Volkswagen, making Ford and Volkswagen equal minority shareholders in the self-driving company. Uber acquired Pittsburgh-based Otto, which offers self-driving robot technology and services for research and industrial clients, for more than $600m in 2016. Simultaneously, GM bought Cruise the same year. Fierce competition from these companies will be a significant hurdle for Zoox to overcome. In addition, start-ups in the autonomous vehicle space have been facing increasing pressure to reduce costs as they undergo the testing phases. Waymo, Argo AI and Cruise have postponed their launch to 2022 due to the coronavirus outbreak.

Since Zoox is planning on building its own fleet of passenger vehicles, there could be a clash in cultures between a small company like Zoox and Amazon, which is a global conglomerate. The overall integration of the Zoox vehicles with the existing Amazon platforms is uncharted territory since no company has implemented such a service yet. Furthermore, Amazon has recently been under tremendous pressure from labour unions and activist groups due to its social costs and treatment of labour. If Amazon goes ahead and is successful in creating its own fleet of delivery vehicles to reduce logistics expenditure, the need for human labour will reduce drastically and could leave Amazon in a precarious position with these groups.

"Like Amazon, Zoox is passionate about innovation and about its customers, and we're excited to help the talented Zoox team to bring their vision to reality in the years ahead." — Jeff Wilke, Amazon Global Consumer CEO


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