Google and Others Fish for Acquisitions: Here's What They Might Be Looking For
Google CEO Eric Schmidt gave what he just had to know would be a much quoted comment to the Nikkei today, explicitly saying that the company had “begun seriously looking into acquisitions again.”
Music to the beleaguered mergers and acquisitions market, to be sure, especially after a recent uptick from other big companies pulling out their wallets again as the impact of the econalypse subsides.
According to sources, Google (GOOG) is working on at least a half-dozen acquisition deals, most of which are small start-ups in the online advertising and cloud computing arenas.
That would be welcome news for many.
That’s because, as The Wall Street Journal noted in a piece today, “August was shaping up to be the worst month for deal making since 1995, according to data provider Dealogic” (see the chart).
That was, until Disney (DIS) bought Marvel for $4 billion, in a deal announced Monday.
Then yesterday, eBay (EBAY) traded 65 percent of its Skype Internet telephony unit to a group of free-spending private investors, led by Silver Lake Partners, for $1.9 billion.
While eye-popping numbers like that make dealmakers smile, most think it is in the spate of smaller venture-backed companies that more of the action will happen, with big companies like Google, Microsoft (MSFT), Apple (AAPL) and even Yahoo (YHOO) as predators.
Many of these were funded in the Web 2.0 boom and have done well enough, but are figuring out that a link with a larger fish will likely make for a better outcome, along with filling in tech and product gaps at the giants.
Think about Facebook’s $50 million acquisition of social networking site FriendFeed recently and you have the right idea.
According to more than a half-dozen Silicon Valley VCs I have spoken to this week, this is the likeliest kind of exit for a large group of their portfolio companies.
Thus, they are putting on their finest and placing themselves on display in the store window, offering talent and innovation.
“We all realize that a lot of these companies are not going to be independent, so we’re all trying to figure out where they best fit in,” said one VC. “We essentially did business development for a lot of the large companies.”
Thus, here are some companies whose names have been bandied about of late by M&A types who say they are more likely candidates for sale:
Veoh, the Web video portal that MediaMemo wrote about in July, has reportedly been searching for a home for a while now as it struggles in a costly space dominated by giants like YouTube and Hulu.
That goes for many other similar video efforts, such as Joost, Metacafe and Dailymotion, all of which have been trying to gain traction.
There is also likely to be a shakeout in the gaming and “guy” content space, which has also seen a lot of funding in the last several years and less monetary success.
Some possible names here include: Xfire, a gaming instant-messaging company Viacom (VIA) bought a couple years ago for $100 million; Giant Realm, a 20-something guy site funded by Comcast (CMCSA) and others; and UGO, Hearst’s version of a 20-something guy site.
Probably, given the need to focus on monetization, the most active M&A space will be in online advertising.
Sources said Google, for example, has been interested in companies such as Teracent, a dynamic ad-serving and optimization start-up in San Mateo.
There are lots of names in this general arena to pick from, from Tumri to Quantcast to AdMob to the Rubicon Project, not all of which are for sale, but might be for the right price.
Lastly, there is the smart phone and telecom space, where there might be some of the bigger deals.
While Palm (PALM) has been trying mightily to gain traction with its Pre offering, many think that if it does not go as well as hoped, the company will be an acquisition target eventually for giant companies like Nokia (NOK).
While many think Microsoft could also be a buyer of Palm, given the lackluster performance of its Windows Mobile devices, it might be more attuned to a much bigger catch: Research in Motion (RIMM) and its business-oriented BlackBerry empire.
Such a massive acquisition–most of those I bounced that idea off agreed–would be an uphill battle, but it would be perhaps the best fish story ever.
Please see this disclosure related to me and Google.