Shopify (SHOP) completes acquisition of Deliverr for $2.1 billion

Online shop SHOP recently announced that it had completed the acquisition of Deliverr. The total purchase price in the buyout was $2.1 billion, consisting of $1.7 billion in net cash and $0.4 billion in Shopify Class A subordinate voting shares.

Key management of Deliverr has elected to accept a significant portion of its shareholders as Class A subordinate voting shares of Shopify, which will be subject to certain conditions.

Founded in 2017, Deliverr offers a seamless logistics network that currently delivers over one million orders per month to thousands of merchants across the United States.

The recent acquisition of Deliver is in sync with Shopify’s strategy to allocate investment towards simplifying fulfillment for sellers and solving supply chain challenges across the globe.

Shopify Inc. Price and Consensus

Shopify Inc. Consensus Price Chart | Shopify Inc Valuation

Will the acquisition help Shopify grow?

Shopify’s e-commerce boomed during the COVID-19 pandemic as global brands and small stores created online platforms to sell products due to the closure of retail markets.

But as the economy reopened and retail stores began to recoup lost customers, Shopify lost steam. Inflation and possible signs of recession worsened the current market situation, which in turn slowed e-commerce growth.

As a result, investors are now concerned about the company’s future development. Shopify shares are down 78.1% compared to the Zacks Internet Services industry’s decline of 18.4% in the year-to-date period.

To combat this, Shopify is investing heavily in mergers and acquisitions and building strategic integrations with major technology companies to provide new services such as Twitter TWTR sales channel, Apple’AAPL Tap and Pay for iPhone and AlphabetIntegration of GOOGL local inventory with Google.

The Twitter sales channel allows merchants to connect with consumers directly from their Twitter profiles. Shopify noted that this is the first collaboration between the commerce platform and the social media company.

Recent integration with Apple allows shoppers to use Apple smartphones at the terminal to pay for goods. While it may not be a new feature in retail, Apple’s recent Pay Later installments have added a whole new dimension to retail marketing.

Google Shopify syncs local inventory data with the Shopify platform to let customers know when a product is available.

However, these efforts will not be enough to attract new customers to the platform. Due to the current tense geopolitical and macroeconomic environment, there have been worldwide delivery delays and increased supply chain constraints, making it difficult for sellers to fulfill orders.

The recent acquisition of Deliverr is the largest transaction in Shopify’s history and will help the company address its supply chain issues by creating an end-to-end logistics platform to meet the delivery requirements of millions of sellers.

Deliverr will help Shopify elevate its logistics and fulfillment capabilities. By connecting Deliverr to the Shopify Fulfillment Network (SFN), the company will support its latest offering, Shop Promise, where consumers can take advantage of two-day or next-day shipping options from merchants of their choice.

While the company’s near-term growth prospects seem bleak in the current market scenario, the recent acquisition will help it generate new revenue streams in the long run, which will positively impact revenue growth. This will have a positive impact on shareholder wealth.

Shopify currently has a Zacks Rank #3 (Hold). You can see complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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