The juggernaut that is Apple and its acquisition history. Here it is: the final Part III of “Apple’s incredible acquisition spree” case study. Part I in these series analysed one of Apple’s first major acquisitions that set the tone for its future deals. Part II examined Apple’s two biggest acquisitions and whether they were worth it. It is now time to look at Apple’s most recent known deals.
Let’s consider the following: the possible goals Apple is looking to achieve with these acquisitions and in what direction the company is looking to expand in the near future (based on their previous acquisitions).
Deal 1: Credit Kudos.
Apple acquired Credit Kudos in March 2023. Official Companies House date when Apple became a “person with significant control” – 21st of March 2022. The company was reported to have been valued at $150mln.
Credit Kudos is a fintech startup that was founded in 2015. Since then it has grown to become one of UK’s top open banking credit reference agencies. Essentially Credit Kudos supplies data to credit providers to help make better decisions when it comes to lending.
The idea behind “open banking” is that more data is accessible publicly, which promotes better decision making (and, of course, is subject to such constraints by regulators as GDPR for example).
The company was loss-making as of 2021, though it predicted growth in opportunities as more vendors adapt open banking solutions.
What does Apple want with Credit Kudos?
There are multiple goals that Apple is trying to achieve here with this particular acquisition. As per the above, the company was not brought in to help Apple’s top line. However, it plays a vital part in Apple’s strategic goals.
- It is an entry point into the UK market. Apple does not only operate in the music and smartphones industries. It’s services business makes up almost 16% of its total revenue (a lot more than its wearables and iPads combined). Apple Card and other financial services are an integral part of this equation. Apple has been looking to launch Apple Card in UK for a while now. What better way than to acquire a company (or more than one company?) that already has presence in the market?
- Let’s not forget about Apple’s acquisition of Beats. The hardware – i.e. the “product” was already in place. Here, there’re is a very good product, that is used by creditors – Apple can incorporate it into its services when it does do the big launch in the UK.
- Building on the above: Apple is known for its acquisition of talent as part of their deals. By acquiring a company that is familiar with the local legislations, regulators and is already managing all of the above, Apple is saving itself a lot of time (and money) by having those experts in place.
- Open Banking is the name of the game in fintech industry right now. Just look at Visa’s acquisition of Tink for €1.8 billion in 2021. Regardless of location, Apple would not want to miss out on this trend. Any new technology that is up for grabs – they will go after it.
- DATA. The amount of data it can get access to as a result of this acquisition, would mean that Apple can continue to enhance its existing system, and build on its existing algorithms. Exciting…and scary for the end-consumer.
Deal 2: Primephonic.
Apple is not about to drop the ball when it comes to its Apple Music service either. In August 2021 it announced that it has acquired a classical music streaming service Primephonic.
Primephonic was launched in 2018. Apart from just being Spotify for classical music listeners, it had a very interesting business model. Usually musicians are paid based on the number of times that their track is played. However, due to the genre Primephonic chose a different and rather unique approach. It paid musicians based on the number of seconds, that the user listened to their music overall.
In the United States (Apple’s main market), classical music streaming accounts for only 1%.
As early as 2019, its CEO, Thomas Steffens was hoping for the service to be acquired by someone like…Apple. (To help reach more users, and provide better experience to classical listeners). His wish came true in 2021.
So, what’s in it for Apple?
Why did Apple acquire Primephonic?
1. Death by a thousand cuts. Just because a market is small, doesn’t mean that you should not go for it. Add a number of niches together into a bundle, and you get… well, Apple Music. By incorporating Primephonic into its product, Apple is adding more users that use Apple products. (This reminds one of…Emagic).
2. As per the statement put out by Primephonic (as of 13th of March 2022), the company is “working on an amazing new classical music experience from Apple for next year”. An expected release of a classical-oriented product in 2022 would be the next step – and Apple has confirmed this.
3. Once again – talent acquisition. As of March 2022, Steffens (the founder) has been working closely with Apple (and so has the Primephonic team). What better way to dominate a niche market than by having its leaders join you?
One might ask: what about revenue? Seems like the product was the main target here. As per Crunchbase, Primephonic was making less than $5mln a year. This acquisition has “product development” by Apple written all over it.
It is clear based on the above that Apple’s acquisitions focus right now continues to be on: Apple Music and continuing its dominant march in the music industry and further expansion into the financial services, capturing new markets. Over 35 years after it was founded, and the company is still looking to continue to innovate and expand into new markets. It doesn’t look like its successful run will end any time soon (at least for a few years).
Will the regulations in Europe deter its expansion into the region? It is hard to say, and that is a whole other subject matter to examine. For now, Apple’s M&A spree continues regardless.
This concludes a three-part case study on Apple’s acquisitions. I thoroughly enjoyed doing the research here, as M&A business case studies have a special place in my heart. All parts are now available on the website. You can access previous parts here: Part I, Part II.
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