This liquidity is desirable on the part of Teavana, who may in turn do anything it wants with the money. The shareholders are not tied to Starbucks in any way after the deal closes, because of the cash nature of the transaction. Given this liquidity, Starbucks has additional leverage in haggling for a lower purchase price, as compared to if the deal was arranged as a stock swap, or as being paid for by a combination of equity as well as debt. The idea is for Starbucks to leverage the liquid, all-cash nature of the intended purchase to sweeten the terms and to make sure that is is able to get the biggest concession/discount possible for any purchase price negotiation (Hedges, 2013; Sherwin, 2013; Weiss and Hughes, 2014; Baertlein and Geller, 2012; Ashworth, 2012).
The liquid position of Starbucks is a leverage that can be tapped to negotiate for the best price for the acquisition/merger, and as discussed above, it can certainly be used to lower the price for the deal. At the same time, that Starbucks is also bringing to the table its excellent brand and operations, and its wealth of experience developing a global presence for its products and its stores.
Its experience with Tazo, in particular, is a strong leverage and proof that Starbucks is not only bringing money to the table, but this unequalled expertise. It is in the interest of shareholders to make sure that Teavana thrived after the purchase, and so Starbucks can also leverage all of this to make sure that it is able to get the best price and terms for the deal.
Put another way, Teavana knew that it needed to continue to grow in order to generate new value for its shareholders, . and with Starbucks’ capabilities and global presence the latter was in a position to do exactly that and more. On its own Teavana may be able to establish a global network of stores and shore up its brand to be a global brand like Starbucks, but one can argue that it is a long slog, and that the operational excellence that Starbucks has been able to develop is something that will take time and a lot of effort to replicate.
The deal with Starbucks is a guarantee that Tevana benefits from all that Starbucks operations and marketing excellence bring to the table. Beyond the liquidity therefore, Starbucks can use its expertise in building global brands and its capabilities running stores worldwide in negotiating for the best terms for the deal (Hedges, 2013; Sherwin, 2013; Weiss and Hughes, 2014; Baertlein and Geller, 2012; Ashworth, 2012).
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