Call it a case of quantity over quality. The online media business saw 707 mergers or capital transactions last year, compared with 615 in 2007.
But there were fewer large deals, and access to capital was “finite,” according to a report by Peachtree Media Advisors Inc.
Total M&A value hit $16.9 billion for the year, a 62% decline from 2007.
In addition, the number of deals slipped as the year went on—there were 53 transactions in the fourth quarter, compared with 92 in the first.
Peachtree attributed the drop-off, in part, to a valuation gap. “Buyers want to purchase companies at current public market valuations, which are much lower than the valuation multiples that sellers want,” it said.
The report also documented 348 “capital raises,” up from 273 the year before.
But the number dropped from quarter to quarter.
“With investors less willing to finance cash burn from operations, online media companies are being forced to turn a profit or face selling to a strategic buyer at a relatively low valuation,” Peachtree stated.
But the firm warned that “the pool of venture capital may become more scarce as venture capitalists move dollars away from online media and into the green technology and healthcare sectors.”
The year showed that it was “just as easy to fold an online media company as it was to start one up.” Peachtree added.
Of all M&A and capital activity, 36.7%—or $6.2 billion—was in the consumer sector. This includes social networking, blogging, online games, video and publishing. The second biggest sector was online business services, at 28.4% of total value.
The commerce sector ranked third, and the segment known as enabling, analytics and ad serving was fourth. Peachtree described the latter category as “the sector de jour for investors.”
Roughly 3.5% of the total was spent on mobile transactions.
