FOCUS and Intangible Insights (2i) are pleased to present to you our Internet & Digital Information (“IDI”) Quarterly Insights Report, a newsletter providing strategic insight into key market dynamics, capital markets developments, and mergers and acquisitions trends impacting participants in the IDI industry. Topics covered in this issue include:
- Some Perspective on the Current Economic Debate
- A Look at Three Key IDI Drivers
- A Look Back on Some Interesting Second Quarter Events
- Public Company Internet and Digital Information Market Valuations
- IDI M&A Activity and Trends
Please click here for the report.
Yahoo! Inc (NasdaqGS:YHOO), provides internet services to users, advertisers, publishers and developers. The Company has been struggling to hold its market share among its top competitors (Google, Microsoft), especially in the search business and losing share to Microsoft’s BING while competing with young innovative companies in their core business areas (See more details in FOCUS’ Internet and Digital Information Quarterly Insights Report). (more…)
Internet-Reliant Sector M&A Activity and Insights
Intangible Insights analyzes the Internet industry by functional area and by vertical. The functional areas, which we believe represent the vast majority, if not all, Internet-Reliant companies, are categorized using standard industry definitions for Content & Media, Applications, Merchandising, and Offline Service (not included in the index). We try to include pure play companies for each functional category in the 2i Stock Index, but some companies cross functional boundaries (e.g. Amazon, which generates significant merchandising revenue through the sale of third-party products but also has viable and growing revenue from its Amazon Web Services, an application function.) We include these firms because of their industry leading status.
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Part 4 of 2I’s Quarterly Internet and Digital Media M&A Report is an appendix of supporting information for our research posted in the first three sections of the Report.
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Overall M&A Activity
Clearly M&A transactions have slowed substantially during the last two quarters, with Q1-2009 being the slowest quarter for deal closings over the past 12 quarters. First quarter 2009 M&A activity is off 39% when compared to the recent peak of Q2 2007. However, if we stop and recognize that M&A transactions were getting completed at a historically blistering rate in 2007, we gain a bit of perspective. In fact, with all of the doom and gloom and economic meltdown, it is astonishing to see that M&A activity in Q1-2009 was off only 16% when compared to a more moderate time of M&A in Q2&3 2006. We fully expect that Q2-2009 also will be slow, but we’re starting to see signs that the last two quarters of 2009 could possibly be more active than the first two. With a 6-8 month cycle for typical transactions getting completed, look to the first two quarters of 2010 to be back at a pace more in line with historical averages.
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At 2i we read a wide range of financial resources, from the standard print media to the blogosphere to subscription databases. Depending on what you read and who you follow, there seems to be some consensus that the general economy may have bottomed, and although it may be a long tunnel, there could be some light at the end of it in Q4-2009 and Q1-2010. The Dow Jones Industrial Average, a leading economic indicator, is only down 3.5% since the beginning of the year. The unemployment rate, a lagging indicator, continues to rise to 8.9% currently. While the broad economy is a fundamental driver of the internet industry, we like to maintain our focus on the Internet-Reliant industry.
We’re posting four blogs over the next few days on the Q-1 State of the Internet Industry. Once all the blogs are posted, we’ll put them all into a PDF document and include it on our Reports page.
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Along with tracking stocks by functional category (i.e. applications, content/media, merchandising), we’re in the process of selecting companies to track by vertical. Regular readers of 2i will know that we pay particular attention to the eHealth, eGov, and eLearning industries. One eHealth company we will be tracking is BioClinica, which announced on May 5 that it signed an agreement to acquire eTrials Worldwide, Inc.
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Blackboard’s acquisition of ANGEL Learning further solidifies its commanding position as the leading Learning Management System (LMS) provider in the market. For the roughly $95M cash and stock that Blackboard (NASDAQ: BBBB – $29.16) paid for ANGEL, they acquired a rapidly growing, well-regarded competitor. But the market does not seem to like the deal – shares are off nearly 12% since the announcement. What is the motivation for this acquisition?
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James Kwak of the influential economic blog, The Baseline Scenario, posted a blog earlier this week titled “70% Off Sale”. His point: Granted, stable companies need to conserve cash and avoid risks, but this economic environment provides great deals for savvy companies.
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2i’s Deal of the Week is LivingSocial.com’s (LSC) acquisition of BuyYourFriendADrink.com (BYFAD) . . .
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