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More Consolidation to Come in Social Gaming August 17, 2010

Posted by jeremyliew in M&A, social gaming.

These are interesting times in the social gaming industry. Two weeks ago Disney acquired Playdom, and last week Google acquired Slide. Just like that, two of the largest social game publishers have become part of larger companies. This activity all comes on the heels of EA’s acquisition of Playfish late last year.

Social gaming, as a category, has grown incredibly quickly, becoming one of the dominant drivers of usage on FacebookFacebook, and an increasingly core component of people’s entertainment. This growth represents a real threat to other forms of entertainment, and has precipitated the three deals that we have seen so far.

Read the rest of this post at Mashable

Tradional media companies are unlikely to be buyers of consumer internet companies for a while December 8, 2008

Posted by jeremyliew in Consumer internet, M&A.

Over the last few years TV and Print publishing companies have been acquiring internet companies and providing the primary source of exits as IPOs have been few and far between. Exits have included MySpace and CNet on the top end to last.fm and Plaxo in the middle and Kaboodle and LX.TV on the smaller side.

It looks like there will be fewer such exits in 2009. The major newspaper companies are in trouble (including Tribune and NY Times) with their debt loads which will make acquisitions difficult for them.

It isn’t any better on the TV side. PaidContent reports from UBS Media Week that Viacom has no acquisition plans for a while:

Viacom President & CEO Philippe Dauman told attendees … that the company is focused on organic growth and tended to avoid acquisitions for the past two years… “We have plenty to do in-house; we don’t have to look outside at this point,” he said.

and that NBC is pulling back from M&A.

Zucker added, “ In the 18 months prior to September, I don’t think there was any major media company more active in M&A.” As for pulling back now, “I don’t think that says anything about us more than it says about anybody. We’re in a different time. We’ve got our portfolio.” (I asked Zucker after the session if he had any spending range this for acquisitions—for instance, $50 million dollars might be ok even though nine figures is out. He said no. He also said the company is likely to do more partnerships.)

Fox/Myspace is looking for deals, but only if they’re cheap notes Alley Insider:

MySpace (NWS) CEO Chris DeWolfe told a Reuters conference closed to outside reporters:

DeWolfe said companies worth between $200 million and $300 million just six months ago are now running out of money and willing to sell themselves for less than one-tenth of that value.

But he’s not ready to buy just yet — we still haven’t hit bottom.

“At the lower levels the money dries up, everyone’s looking for some kind of exit and the valuations we’re seeing out there are definitely a small, small fraction of what they were even five or six months ago,” he said, adding that he expects these companies to become even cheaper in the next few months.

IAC takes the same position:

Diller told Reuters Media Summit attendees that IAC would have $2.2 billion in cash by March, and it’s a good chance to add new properties to his empire.

Reuters: “This downturn is going to present opportunities if you’re in the position that we’re in,” he said, citing entertainment, media and search as areas of interest.

“In entertainment and media, I think there’s going to be a ‘cascade’ of acquisition opportunities,” he said, referring to his expectation that the downturn would worsen.

Diller said he would be interested in acquisitions in search, but not to acquire technology.

“The interest would be on audience, we would acquire audience absolutely. We would acquire vertical audiences as we acquired with Dictionary.com, Thesauraus.com,” he said.

Internet startups looking for a big exit will need to keep their heads down and focus on building audience and revenues for the foreseeable future.

Founders, be ready for the long haul November 10, 2008

Posted by jeremyliew in exits, M&A, start-up, startup, startups.

The chart below shows the average time in years between a startup’s first equity investment (usually Series A) and its sale, for companies sold in each year from 1997 to 2007. (Source is Dow Jones Venture One/E&Y study)

As you can see, companies sold in 2007 had seen almost seven years pass since their first financing. Often they were founded up to a year before they took their first financing, so they were likely eight years old when they were sold. These numbers are averages – some companies exit faster, but some exit slower as well.

This data represents M&A exits. Usually the time to exit via IPO is even longer.

Although no data is available yet for 2008, there has been virtually no venture backed IPO activity in 2008, and the number of M&A tractions is sharply down from previous years. That means that the time to liquidity is likely getting longer.

Obviously, these are backward looking metrics (2007 numbers refer to companies that were sold in 2007, not companies that were started in 2007). However, founders of companies looking to raise venture capital should be ready for the long haul. You can’t start a company and expect a quick flip.