(by Tolman Geffs, Jordan, Edmiston Group, June 2005): Just 11 online media and services transactions in May, but the seven that reported deal values totaled nearly $2 billion – as much as the entire first half of last year. The four largest:
— Experian announced it is paying $330 million for LowerMyBills.com, 25x the investment to date to build the company
— General Atlantic Partners is paying a reported $250 million for WebLoyalty, or 11x the amount invested
— Sabre Holdings agreed to purchase LastMinute.com for $1.1 billion, adding strong European holdings to its Travelocity business.
— United Internet, a large German ISP, will take over WEB.DE AG for $252 million to create Germany’s largest internet services and portal group..more in extended post..
That first one is probably a “why didn’t I think of that” for 90% of readers. Founded in 1999, LowerMyBills is an online lead generator for mortgages and other consumer financial products. With just $13 million invested, the deal is a grand slam for the VC’s. Database giant Experian is building consumer lead gen businesses in high growth segments – for example in education with last month’s acquisition of AffiliateFuel – and is likely to make further vertical acquisitions. Interesting that a data player is moving more aggressively than most large newspaper groups and other traditional publishers in online lead generation.
The WebLoyalty deal is notable for two things – the price and the buyer. $250 million is about 3x the company’s $86 million revenue in 2004, another remarkable return on the $22 million invested to date. And the buyer is a large private equity group, among several that bid. This buyout continues the trend highlighted last month of PE players like General Atlantic stepping up to pay growth prices for high cash flow internet businesses.
Much smaller but also interesting – UK and US tech and games publisher Future PLC bought CheatPlanet, a user-driven content site. How user driven? The company claims $800k of pretax profit on $900k revenue – so not a whole lot of editorial cost (not to mention no ad sales force either). The $8.7 million price appears sky high looking at revenues but reasonable on an earnings basis, if (a big if) Future can grow the site at those margins. Deals in the gaming content space are getting very competitive, driven by strong advertising demand. The other large gaming publishers are dialing up the remaining sizeable independents.
Tolman Geffs is a managing director with The Jordan Edmiston Group (JEGI), a New York-based investment bank founded in 1987 and focused on the media and information industries. Tolman was previously CEO of Internet Broadcasting Systems (IBS), the largest online TV network. You should assume that Tolman and his firm have or will do business with companies mentioned in this column.