JUMPING IN
Don't know if three data points make a trend, but with the unsolicited $2 billion bid for game software company Take Two by Electronic Arts, we now have at least three 30% plus premium bid deals for public technology companies in a depressed stock market.
The other two of course are the on-going bid for Yahoo! by Microsoft, and the just accepted $2.4 billion deal for Getty Images by private equity firm Hellman & Friedman.
With the tech sector battered more than most in this most recent correction, and still relatively strong growth fundamentals, it shouldn't be surprising to see more of this in the coming months.
Both strategic and/or financial buyers seem anxious to take advantage of the relative bargains in the public markets, assuming of course they can finance the deals via their balance sheets despite a tough debt financing environment.
At least someone putting their toes into these turbulent tech waters.
Why are these deals a good sign? What is Getty Images but a portfolio of copyrighted images, a business that is being undermined by Flickr content? Given the financing costs and premium paid, what can H&F do but try to goose licence fees - ie try to extract higher rents? Why is Yahoo a good deal for Microsoft - other than a last ditch attempt to chase Google? Others have commented on this deal - it is less about strategy and more about desperation in the web space. Electronic Arts bid for another game company is at best an economies of scale deal.
I don't see these deals as buying great assets on the cheap. Each has a different logic, but it is not clear that any of the acquirees has great fundamentals, nor the businesses they are in.
Posted by: Alex Tolley | Monday, February 25, 2008 at 11:11 AM