So what if the IPO window is closed? Web companies still have plenty of options, as illustrated by a spate of big-dollar dot-com acquisitions announced over the last 24 hours.
The biggest web deal announced today was CBS' plan to buy __ __CNET, one of the last independent online content companies, for $1.8 billion, or $11.50 per share. The valuation represents a healthy 45 percent premium over yesterday's closing price, and it's a couple hundred million dollars more than the $1.6 billion CNET spent on its ZDNet acquisition eight years ago.
The CNET deal was just one piece of news on a pretty hectic day for the mergers and acquisitions market. Elsewhere, Comcast announced plans to buy Plaxo.
(The price was reportedly somewhere in the $150 million to $200 million range.) And Ask.com (owned by IAC) bought Lexico, parent company of Dictionary.com, for a reported $100 million.
"There is an overwhelming number of companies seeking an exit through M&A," says Michael Bruns, investment banking director at Robert W. Baird & Co. "I was at Interop [a networking trade conference] a few weeks ago, and it was amazing how many companies there were for sale ... It's been awhile since I've seen this kind of volume."
A healthy M&A market is good news for tech startups that have seen the IPO window slam shut -- Classmates.com, for example, pulled its public offering in December after a dismal day at the market. ArcSight, a security software company had a dud of an IPO in February, and is currently trading below its opening price.
"The general sentiment I'm feeling is that there's a window of opportunity to get some liquidity now, which may be better than waiting another year when the options may not be as plentiful," Bruns says.
Certainly, the deals were heartening news to some Silicon Valley investors. Jeff Clavier, a prolific angel investor and founder of SoftTech VC, was more than a little encouraged.
"I think it just shows that even in a recessive market that's supposedly upon us -- hefty valuations and premiums are being paid to acquire companies that some people would have said, 'Ah, I wouldn't touch them,' not very long ago," Clavier says. "A lot of people didn't see the CNET-CBS deal coming, and the fact that Plaxo could find a buyer after seven years -- a company that had been considered a spammer of the worst sort before its turn around -- could sell at that price range is pretty remarkable. And if you look at who the buyers are, they're not Google, Yahoo and Microsoft . . . There are a lot of potential buyers for web businesses now."
The news that CNET is finally getting hitched doesn't come as much of a surprise to anyone who has followed the company. In the face of slowing growth, a hostile takeover attempt and sluggish stock performance, the company has long been rumored to be an acquisition target.
"We started coverage under a year ago [on CNET], and part of our thesis was that online companies with targeted content and a large reach would likely be acquired by offline media properties. That's exactly what you have here," says Clayton Moran, an analyst with Stanford Group. The next to go on the block? TheKnot.com and SourceForge, both of which are ripe acquisition targets, according to Moran.
The big surprise in today's news is that CBS would pony up the cash for CNET, one analyst says. While other networks, including Disney (parent company of ABC) and NBC, developed fairly robust online strategies, CBS has been sluggish in the space.
"Not what we expected," wrote Jason Bazinet, a Citi Investment Research analyst. "[The deal represents] a bid for traffic, but pricing risk is high ... We suspect CBS is trying to build a formidable presence on the web, but [the key] challenge will be sustaining premium CPMs [cost per thousand impressions]."
Bazinet also expects CBS shares to fall about 80 cents today. (When last we checked, Class A shares of Viacom were trading up by 14 cents per share.)
See Also:
