When Facebook acquired Instagram (and its 13 employees) for $1 billion in cash and stock, Instagram was valued at around $500 million and had a user base of around 30 million, which was nothing in comparison to Facebook's 845 million active users. Once acquired, Instagram remained a separate entity, but it signified to investors that Facebook wanted to expand in the mobile-platform sphere and neutralize a serious social network competitor.

1. What type of M&A transaction would this be?

Horizontal - both companies are in the same line of business (generally competitors)-E.g., Disney purchased LucasFilm

Vertical - the companies are in different stages of production in the same line of business-E.g., Microsoft purchased Nokia

Conglomerate - companies are in different lines of business-E.g., Berkshire Hathaway purchased Lubrizol

2. What do you think motivated this transaction?

3. Without being biased by hindsight, what aspects of this acquisition seem smart and what aspects seem risky?