$9 Billion Spent on Web Properties in Q3

Buyers spent more than $9 billion to acquire nearly 225 Web properties in the third quarter of 2000, according to Webmergers.com, a quarterly survey of mergers and acquisition (M&A) activity.

While Webmergers considers the Q3 numbers strong, total spending was dramatically off from earlier quarters. Web M&A totaled $21 billion in Q2 and $52 billion in Q1 of this year. The top deals of the quarter included the $2.7 billion acquisition of Go2Net, Inc. by Infospace.com, Inc, and the $1.6 billion sales of ZDNet to C|Net Networks, Inc.

Web M&A Activity
Quarter Deals Dollars
Q1 1999 52 $13.1
Q2 1999 124 $20.4
Q3 1999 134 $6.8
Q4 1999 152 $7.1
Q1 2000 233 $51.7*
Q2 2000 245 $21.4
Q3 2000 223 $9.3
Source: Webmergers.com
* Excludes AOL/Time Warner deal

Q3 transactions totaled $42 million, less than half the average deal size of the previous quarter. The decline in average deal size reflects several factors, including shrinking valuations, a decline in very large deals, and an increased number of acquisitions by small private companies. Privately held buyers announced 50 percent of the 223 deals in the quarter, the highest percentage of deals since Webmergers.com began keeping records in January of 1998. Although closely held companies were responsible for a large number of deals, publicly traded companies continued to rule in terms of total spending, accounting for 87 percent of acquisition dollars spent in the quarter.

Despite their plummeting stock valuations, Internet companies continued to dominate dealmaking in Q3. Dot-coms racked up 85 percent of the spending, the third highest proportion of spending since Q1 1999. Internet companies continued to take advantage of bargains despite often dramatic declines in the value of the stock they typically use as deal currency. For example, on July 13 Buy.com bought wireless e-tailer Telstreet.com for $8 million in stock, even though Buy.com’s stock was trading at 85 percent below its 52-week high. Brick-and-mortar companies, which have been widely expected to wade in for the dot-com bargain basement, remained on the sidelines in the quarter.

Spending on business and professional-oriented sites totaled 25 percent of total spending vs. 21 percent for consumer sites (about 48 percent was on general-audience properties). The quarter brought the highest percentage of spending on business-oriented targets to date, just slightly edging out the first quarter of 2000, as buyers turn their attention to higher-yield business markets, and as B2B exchanges and procurement services attempt to buy market share.

Content properties rebounded after a sudden drop in Q1. Content sites accounted for 68 percent of total spending in the Q3, almost identical to that in the second quarter. In Q1, content spending plummeted to 25 percent of the total in large part because of a surge in B2B deals.

International buyers also got active in Q3, with non-US buyers accounting for 22 percent of the spending in the quarter vs. 8 percent in the same quarter of 1999. Non-US buyers have accounted for about 35 percent of total Web M&A spending compared with about 4 percent for all of 1999.

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