(By Tolman Geffs) April digital M&A was dominated by the expected purchase of DoubleClick, which a pair of investment funds will take private for $1.1 billion.  Factor in $537 million of cash on DCLK’s balance sheet (and a smaller amount of debt) and the “enterprise value” or real purchase price was about $670 million. This works out to 2.2x revenue or nearly 14x EBITDA, a very good price.  The new owners (Hellman & Friedman and JMI Equity, two large buyout shops) will operate the two sides of DoubleClick’s business separately - the Abacus data group and the original ad serving and related technology. The former is the cash machine and will be crucial to servicing the debt that the company will take on.

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April saw 14 online media and marketing deals, about even with March, but none of any size aside from DoubleClick.  What is notable is the stronger role that private equity funds are starting to play.  Baker Capital bought MusicNet for $30 million, and Polaris Ventures took a majority interest in Choice Media for $25 million.  PE funds are driving much of the overall M&A market, but it is a fairly recent phenomenon to see them playing in online.  (While venture capital has long been core, the distinction is that PE firms buy entire companies or a majority, typically with heavy use of debt).  Not long ago only strategic players could step up to buy online businesses that usually lacked the strong cash flow that private equity players need to see. 

Now just about every PE shop I know is interested in online. In several larger online content and services deals I am handling or know of, the level of private equity interest is well above expectations.  Driving this is the overhang of large amounts of money that these funds have raised and need to put to work.

April also saw a continued trend toward smaller content sites selling to traditional diversified media companies. CMP, a large tech publisher, picked up niche sites DotNetJunkies.com and SqlJunkies.com, Sabre bought travel site IgoUgo.com, and Advanstar purchased OffRoad.com.  We are starting to see a more efficient market for small sites, the way that magazines have traded for many years.


Tolman Geffs is a managing director with The Jordan Edmiston Group (JEGI), a New York-based investment bank founded in 1987 and focused on the media and information industries. Tolman was previously CEO of Internet Broadcasting Systems (IBS), the largest online television network. You should assume that Tolman and his firm have or will do business with companies mentioned in this column.