April 14, 2007
A Googly view of M&A
Talk about a clash of cultures. Google (buyer) and Hellman & Friedman (seller) each had a very different take on today’s $3.1bn DoubleClick deal.
Eric Schmidt of Google was in Argentina this afternoon, but I got the chance to ask him over the phone how he could justify paying so much for a company which, according to one person knowledgeable about it, had revenues last year of only $300-400m. He acknowledged that "the criticism will be, how do we get the money back?", but added that Google had run its sliderule over the business. His assurance:
This is a math problem. We’re good at math problems.
When I spoke to Philip Hammarskjold at Hellman & Friedman, on the other hand, he was marvelling over the very unscientific nature of valuations in the financial markest. The 2005 leveraged buy-out that took DoubleClick private looks like a steal. Hammarskjold:
It’s amazing to look at it now, but there really was little interest in this company.
Fair enough. Hellman & Friedman is a buyer and seller of companies: it’s all about the timing. Google is a strategic buyer: it’s all about the synergies. But there’s a lot more to making a deal of this size work than crunching the numbers. The jury’s still out on last year’s purchase of dMarc for up to $1.1bn and the $1.65bn acquistion of YouTube. Google is surely right to use the gusher of cash from its core business to place some big bets in adjacent markets, but it has yet to prove it can make them work.
work
