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M&A flashback: Amazon announces $775M Kiva Systems acquisition

The purchase of Whole Foods will no doubt go down as one of Amazon’s most significant acquisitions of this decade. But its $775 million deal for Kiva Systems remains the more transformative deal.

The purchase of Whole Foods will no doubt go down as one of Amazon’s most significant acquisitions of this decade—and deservedly so. It was a savvy move, one that put the wider retail industry on notice. But Amazon’s deal for Kiva Systems, while perhaps lesser-known, remains the more transformative one, radically changing how the ecommerce giant fulfills millions of orders and potentially saving the company, by some estimates, up to $2.5 billion.

On March 19, 2012, Amazon announced that it would acquire the robotics startup. The deal represented the ecommerce giant’s 25th M&A transaction since 2007 and still ranks as its fifth-largest purchase, per the PitchBook Platform.

In its announcement of the deal, Amazon called Kiva simply “a leading innovator of material handling technology.” But the acquisition was revolutionary.

Amazon knew what Kiva’s robots could do by the time it acquired the company, having put the technology to use fulfilling shipments for two of its previous acquisitions, and, and clearly saw the potential value of owning the tech itself. The $775 million purchase price for Kiva, whose backers included Bain Capital Ventures and Meakem Becker Venture Capital, represented a roughly 300% premium to the company’s last private valuation of $192 million, dating from its $16.25 million Series D in 2008.

The deal secured Amazon an army of robots custom-made to zip through warehouses, fulfilling shipment requests at a dizzying pace. By the time Amazon fully implemented the use of Kiva robots in 2014, the company had cut the so-called “click to ship” cycle down from the 60 to 75 minutes humans required to just 15 minutes, according to a Deutsche Bank note published that year. It also saved the company 20% on operating costs.

Even as an Amazon subsidiary, Kiva had promised to keep shipping its tech to other vendors. But it didn’t work out that way: In the spring of 2015, Amazon changed Kiva’s name to Amazon Robotics. It then suggested that other retailers keen to use its robotic army let Amazon Robotics and Amazon Services fulfill their orders using Amazon robots in Amazon warehouses.

That’s left an opening in the market for startups working in robotics that VC investors appear only too happy to support.

Rise of the robots

In the years since Amazon struck its deal for Kiva, VC investment in the robotics and drones space has consistently increased YoY since 2010, per the PitchBook Platform, with investment activity beginning to take off in particular after 2013.

Last year, investors pumped a staggering $2.73 billion into the space across 271 deals, the high watermark for the period. And 2018 is on pace for another strong performance, with $955.31 million already going into 38 deals:

For its part, Amazon has developed corporate and academic partnerships to support innovation throughout the robotics ecosystem. It has also deployed robots at warehouses and fulfillment centers worldwide, pushing the likes of German parcel delivery and logistics giant DHL recently to test a range of robotic tech, including Locus Bots and Sawyer robots, at its warehouses in the US, just to keep up as Amazon takes over more of its own shipping.

The day that Amazon announced the acquisition of Kiva, its stock closed at $185.52 per share. Shares of the company ended last week trading at $1,571.68 apiece—a roughly 8.5x increase to its market cap in six years. For comparison, over the same period the NASDAQ, on which Amazon’s shares are listed, has gained 2.5x in value. As Amazon further automates its sprawling global supply chain, its acquisition of Kiva six years ago is arguably the deal that’s done the most to make that automation happen.

  • adam-headshot-15-kbh-637x518.jpg
    Written by Adam Putz

    Adam writes about M&A at PitchBook. Originally from Minnesota, Adam studied philosophy and journalism before earning a PhD in English from the University of Warwick. He is the author of The Celtic Revival in Shakespeare’s Wake (Palgrave Macmillan, 2013). When he’s not covering the latest deal or financial news out of Europe, Adam likes to write about environmental issues. In his free time, Adam enjoys hiking and canoeing, reading and traveling.

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