Trouble and trends, they say, come in threes. Today, a trifecta of deals shows how old-school web companies are engaging in a little retail therapy because they must, and because Wall Street has given them the equivalent of a year-end bonus, thanks to an uplift in tech stocks.
- Amazon (s AMZN) is buying Quidsi, the parent of Diapers.com, for $500 million in cash, or roughly 3 times Quidsi’s 2009 sales. Diapers.com is a hit with the mommy set and is on target to generate $300 million in sales for 2010. Amazon will assume $45 million in debt as well.
- QuinStreet (s QNST), an online marketing and lead-generation company is buying CarInsurance.com for $49.7 million in cash and is expanding its footprint in the insurance business. CarInsurance.com, as the name suggests, sells car insurance online and provides leads to automobile insurers.
- Shutterfly (s SFLY), an online photo service, bought the assets of WMSG Inc., for $6 million and will use these to expand its commercial print-on-demand business. WSMG was in the business of helping deliver direct-marketing campaigns for large companies like Toyota (s TM) and Dell (s DELL)
Now, while we all like to obsess about what company Google (s GOOG) will buy next, the recent wave of M&A shows that it’s actually these old school web companies of a certain age that are looking at a current boom in tech stocks as a way to bolster their businesses. A report from the National Venture Capital Association (NVCA) recently noted that during the third quarter of 2010, there were 104 mergers, a trend they expected to continue. And why not?
Over the past two months, the tech-heavy NASDAQ composite is up almost 500 points or roughly 18.5 percent to over 2800. According to a report in the Wall Street Journal, the tech stocks in the S&P 500 are trading at 13.9 times their forward earnings, versus the average of 12.7 times for the entire index. The current rally in technology stocks is driven by profits and growing sales for companies such as QuinStreet and Amazon.
QuinStreet’s stock is up 60 percent over the past three months, while Amazon has seen its stock jump 40 percent since early September, and Shutterfly shares have climbed over 35 percent since August of this year. Positive earnings are only adding to their coffers, which in turn means they can be used to beef up their businesses.
For related research check out GigaOM Pro (subscription required):
- Cleantech Financing Trends 2010 & Beyond
- Report: U.S. Mobile Venture Capital Investment, Q2 2010
- Motives and Possibilities for a Big Apple Acquisition