When MSFT launched an unsolicited $44.6B acquisition bid for Yahoo!, it was clear that 2008 might set a record for global M&A, with digital media leading the way.
However, I think what you are seeing now with regards to deals in the $50-200M range is a sign of things to come. Yesterday Compete.com was acquired for TNS for $75M, with earn-outs creating an opportunity to double the payoff.
Today Pluck gets bought out by Demand Media, for about $75M. Demand Media is founded by the Intermix executive who sold MySpace to Fox Interactive Media, Richard Rosenblatt. Rosenblatt has been ahead of the curve many times and with $320M raised in funding, it was a matter of time before he took out his checkbook to make another acquisition. Previous acquisitions include eHow and ExpertVillage.
Anyway, I do not think these are exceptions: this year, brace yourself for micro-web deals. Big media companies won’t want to drop $500M and more because the opportunity cost of buying these assets - and the time to integrate these - is far too great. Media companies are investing aggressively online and moving towards a digital and interactive world. In previous years, companies sought to make big acquisitions for exposure to the Internet, hoping that such moves would shelter their offline assets from cannibalization. Today such theories are seen as lunacy and companies understand that small deals (well, assuming $75M is small) will be easier to leverage across their massive asset base and not break the bank.
Of course, it takes two to tango. What you are also seeing is less patience from backers of companies that cannot get over than $100-250M market value barrier. If you have spent $10-50M in financing and you cannot envision how you will return a $250M to $1B payoff to investors, there’s a chance the companies will end up selling… Pluck and Compete are two examples of that, I suspect.
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