Column: Web Matchmaker Thrives in Dot-Bomb Climate
By Angela Moore, Reuters, 6/18/2001
NEW YORK (Reuters) - Most of the dot-com economy is imploding, but Tim Miller's Internet business is alive and kicking.
Raised without a television and educated in a one-room Michigan schoolhouse, Miller is the president and founder of Webmergers.com, a firm that matches buyers and sellers of Internet companies and their assets -- domain names, hardware, business plans and even employees. The site also provides statistics on technology merger and acquisition activity.
''There is something about mergers that I love,'' Miller, 47, said. ''I'm a compulsive networker and this institutionalizes my compulsive nature.''
The San Francisco-based firm has tracked the demise of the dot-com economy, which began in earnest about a year ago. The Internet's wild valuations and subsequent avalanche of consolidation and bankruptcies sparked a fire-sale mentality.
''The company is well-positioned, because he's come at this from a journalistic perspective, documenting who's doing what to whom out there,'' said Andrew Sherman, a capital partner with law firm McDermott, Will & Emery. ''That's a service people need and want, especially given the market conditions.''
At least 493 Internet companies have folded since January 2000, and 55 percent of those deaths were in the first five months of 2001, Miller said. In May alone, 54 Internet firms bit the dust.
The dot-com bust accompanies a sharp fall in technology merger activity. There were 2,095 technology mergers valued at $273 billion in the first five months of 2000, the hey-days of the tech craze. This year, the deal volume has fallen by almost half to 1,251 deals and the value has plummeted 82 percent to $48.46 billion, according to Thomson Financial Securities Data.
Hundreds of Web businesses are looking for a buyer, and buyers want specific things. This is where Miller comes in.
Miller's Web site has more than 150 listings, ranging in cost from several thousand dollars to $10 million or more. The properties range from a hammock retailer www.hammocks.com (http://www.hammocks.com), to a travel guide or an aircraft parts portal www.airparts.com (http://www.airparts.com).
Webmergers.com, which tends to focus on small Web businesses, charges a $150 introductory listing fee to companies looking for buyers. It also sells research reports to consulting firms and investment banks, and gets referral fees from brokers and investment bankers representing a seller.
''We're a hub for Internet buyers and sellers, kind of a neutral matchmaker,'' Miller told Reuters. ''Not to be too grandiose, but I compare it to Christie's or an auction house that provides a basis for valuation.''
The idea for the firm, which was founded in 1999, came to Miller when he was helping a friend sell his small Internet company. There wasn't any information available on comparable deals, so Miller started building up a database.
''The reason a lot of people aren't doing deals right now is because there's no consensus on valuation,'' Miller said. ''Until we get a stable base it's going to be a hard market; one thing we provide is a baseline for making some deals.''
The market downturn has increased the number of seller e-mail inquiries and seller listings, but buyers these days are loath to pull the trigger, Miller said. Buyers take about six months to close deals, really scrutinize the books, and want things on the cheap, he added.
HIGH-PROFILE CASUALTIES
Vultures are circling carcasses that once were the darlings of the Nasdaq. Etoys Inc., which at its height was worth $10.3 billion -- more than its bricks-and-mortar rival Toys R Us Inc. (TOY.N) -- sold off the last of its assets last month to privately held KB Toys for a paltry $3.35 million.
''Etoys in particular is indicative of the massive deflation that we've had in the tech space,'' said Ted Stone, a managing principal with August Advisors, a restructuring firm that specializes in distressed tech firms. ''A number of people have used Etoys, conversationally, as a benchmark to describe where the market is.''
Other Web disasters include Pets.com, marchFIRST Inc., and kozmo.com.
''We've been seeing the Web turning into a dirty word,'' said Ed Soh, an associate with Alterity Partners, a small investment bank that specializes in tech mergers.
''First content burned, then e-commerce, then booksellers, toy companies, B2B,'' Soh said. ''There are a lot of companies that cannot raise money in this environment. M&A is a good exit strategy for some.''
Some Internet companies are trying more creative routes.
Internet.com's (INTM.O) name suddenly became a liability once the bloom was off the dot-com rose. To survive, it bought a conference company and changed its name to INT Media Group.
Online postage and shipping business E-Stamp Corp. (ESTM.O), in an attempt to park its $19 million in cash, interviewed widely to find a cash-poor company with a more desirable business model. It finally bought a majority stake in Learn2.com Inc. (LTWO.O) and is now pouring money in the online learning sector.
''M&A is kind of a recession-proof area because in good times buyers are voraciously buying with over-inflated stock as fast as they can, and in bad times sellers are flocking to the market trying to sell their properties,'' Miller said. |
