Ad Company Acquisition Frenzy
On Friday, I read on TechCrunch that Microsoft had declared that it is acquiring advertising network aQuantive, the parent company of Avenue A | Razorfish, Atlas and DRIVEpm, for roughly $6 billion in an all-cash transaction.
aQuantive is a public company (AQNT ) with a market cap of just $2.8 billion as of Thursday. The $6 billion acquisition price represents an approximate 2x premium on Thursday’s closing price – clearly a reflection of the fact that there were competing bidders.
In a media call on Friday morning, when asked about the magnitude of the premium vs. Thursday’s closing price for aQuantive, Microsoft responded that if they can drive growth through acquisition better than through internal growth they will do it. “We have the economic fire power to do more if we wish to.” Microsoft says this was a competitive bidding situation, and “we are delighted to have won.”
This is largest Microsoft acquisition to date, but it represents only 2% of Microsoft market cap, and they have $35b in cash on hand.
The acquisition comes after recent big acquisitions by Google and Yahoo in this space. Google bought Doubleclick for $3.1 billion in April. Later that same month, Yahoo acquired competitor RightMedia for $680 million. Just last week, WPP Group acquired yet another company in this space, 24/7 Real Media, for $649 million.
2006 revenues for aQuantive were $442 million. Net income as about $54 million. aQuantive’s operating companies include both tools and ad agencies. The company is located in Seattle.
My personal feeling on the matter is that Google set this ball in motion, and a run-up has ensued. That said, there is certainly an argument to be made that as ad spending moves increasingly to the web that this makes strategic sense. I wonder if we should all run out and invest in ValueClick (VCLK)… What do you think?
Ad Network, aQuantive, Microsoft
