Tech M&A Rises to 2000 Levels

As reported in the NYTimes DealBook, merger mania that gripped the world during the dot com bubble seems to be making a comeback. Fueled by Facebook's two big acquisitions, the dollar volume of tech deals is up 90 percent worldwide, to $65.2 billion, year over year, according to Thomson Reuters data. This is the highest it has been since the year 2000.  The ten biggest tech deals of the year all involve acquisitions of American companies, the biggest of which has been the purchase of WhatsApp for $19 billion. The WhatsApp acquisition is the fifth largest tech deal ever, according to Thomson Reuters. Technology is hot right now, and looks to be picking up steam. We've received more inquiries from technology companies this year than we typically do. Not everyone is excited about the tech boom, however. Castlight recently went public in an offering that defied traditional valuation metrics; the company's valuation soared to more than $3 billion on 2013 revenues of only $13 million. Yahoo! finance called it the worst IPO of the century. So, where does this leave the rest of the market? As with any bubble, everything is rosey until something pops. With the momentum tech has built so far this year, it wouldn't surprise us to see more large deals over the next 9 months of the year. However, if valuations continue to defy historical measurements and reality checks, watch out - the last time companies without profits were going public at incredible multiples (dot com bubble), the market correction was harsh and swift. Read the original article from NY Times DealBook here.

Facebook to Acquire WhatsApp for $19 Billion

February 20, 2014 11:58 by Clayton Reeves in M&A, Technology  //  Tags: , , , , , , ,   //   Comments (0)
In the biggest internet deal since Time Warner / AOL deal in 2001, Facebook has agreed to acquire WhatsApp for $19 billion. The first thing to notice about this deal is the price.  When Facebook paid $1 billion for Instagram, many thought it was too large of a price tag for the mobile photo app. However, WhatsApp is a much larger fish with a striking growth profile. WhatsApp is a messaging service that eschews typical ad-based revenue business models for a simple, fast, easy to use messaging interface. The app has been successful because it is best in class and does not track user data or spy on users. According to Jim Goetz of Sequoia Capital, WhatsApp's only venture sponsor, “It’s a decidedly contrarian approach shaped by Jan’s experience growing up in a communist country with a secret police. Jan’s childhood made him appreciate communication that was not bugged or taped.” As reported by CNN, WhatsApp has more than 450 million users (more than Twitter) and is adding a million users a day. Facebook CEO Mark Zuckerberg recently said, "No one in the history of the world has done anything like that." WhatsApp is also the most popular messaging app for smartphones, according to OnDevice Research. Unique to this deal is the fact that WhatsApp will still refuse to use advertisements, so Facebook's typical monetization strategy will not apply. It will be interesting to see how the business combination plays out, and whether WhatsApp will truly be able to resist monetizing their hundreds of millions of users with advertisements or data collection. 

Past Posts