Tata: Leaping ahead with Jaguar

image In a steady shifting of the tide, more and more Asian companies have been buying up American companies in the last couple of years. According to WSJ, Asian acquisition of foreign companies more than doubled to a record $433 billion in 2007. In the same time, image US deals increased by only 14%.

Boosted by the growing economies, and the cheap dollar, US acquisitions are beginning to look decidedly more attractive to far eastern and south Asian companies seeking to establish an international presence.

One deal that is in the works, and is attracting a great deal of attention is the planned acquisition of Ford’s Jaguar and Land Rover units by Tata Motors, a part of the Indian conglomerate, the Tata Group.

image Tata Motors had a great photo-op recently, as Chairman Ratan Tata unveiled the much anticipated "Nano", which at $2500, is the cheapest car in the world. The Nano is aimed at becoming a "starter car" for the Indian market. With this car, Tata has created a niche space without any competitors - for now, anyway.

That selling its money losing Jaguar US operations seems to be a clearly beneficial move for Ford. The bigger speculation seems to be about what Tata’s plans are for the acquisition. Rumors are that they are planning to build a cheap car for the US market, and would, in future, leverage the Jaguar international distribution system.

The Tata group, which started in 1870’s as a textile mill in India, has since grown into a monolith with 98 companies in almost every business sector imaginable, including Iron and Steel, Energy, Consulting services, Engineering and Automotive.

The group has made several acquisitions recently and hit the headlines when it took over the European steel maker Corus group for $9.5 billion, in 2006.



Liberty Media buying bodybuilding.com for $100 million

image Debt crunch not withstanding, deal making at the sub-billion dollar level carries on at a decent clip. Liberty Media Corp. - parent of the publicly traded Liberty Interactive (which owns QVC) and Liberty Capital (which owns Starz) has announced that it will acquire a controlling stake in bodybuiding.com.

Liberty Media has been focusing on acquiring niche internet sites which actually have real revenues. Their past acquisitions include backcountry.com - an ecommerce site that sells outdoor sporting gear, and proflowers.com, an online flower delivery service.

Bodybuilding.com contains a lot of information on fitness and body building (18,000 pages according to them) and has an active community. The site is getting about 2 million visitors per month, has 100,000 users, and sells a whole range of health, fitness, muscle building and weight loss products.

Bodybuilding was self funded until 2007, when the private equity firm, Milestone Partners acquired a 60% stake in the company.

Bodybuiding.com’s revenues are expected to reach $120 million in 2008, up from $90 million in 2007. Given the numbers on the acquisition ($100 million for a controlling stake), Liberty Media seems to be getting a pretty good deal!



Let’s play the Plaxo valuation game.

plaxoYesterday Plaxo put itself on the block for sale. They have hired investment boutique Revolution Partners to assist in the sale.

They have had two notable successes; the first one was that have been able to overcome the (well deserved) bad reputation of being "spammy" and the second one is that the tool called Plaxo Pulse is a great hit.

Plaxo Pulse enables sharing of content from multiple different sources across the social web, including blogs, photos, social networking services, rating services, and others. It is based on Google’s open social container.

The down side is that they still do not have a good revenue model. The revenue numbers for Plaxo are hard to come by and that probably means that they are really anemic.

They currently have about 15M users (20M if you look at the forward trend and not the trailing trend).

The company has so far raised $28 Million in four rounds, from Sequoia & Ram Shriram (Series A; 2002 $3.8M @ $7.5M post), Globespan Capital (Series B; 2003; $8.5M @ $33.5M post), Cisco (Series C; 2004; $7M @ $64M post), and ; 2006; $9M @ $122M).

So, let’s talk about the valuation and how much would Plaxo sell for. I know, these could be, and in this case they probably are, different numbers, so let’s play the game as to how much do you think Plaxo is worth and how much would it sell for.

As a data point, remember that in 2006, DAG already valued them at $122M.

My take: at $5/non-paying user, it is worth about $75M max, and it will sell for about $225M. The $225M purchase price will be justified by saying that one should look at the forward extrapolated user base, and the expected improvement in the revenue, to come up with the current purchase price (!). Assume 25-30M users next year, that gives about $150M as the allocation for the user base and rest as multiplier for the potential revenue improvement. There is some double counting here, but what is a few tens of millions between friends?

Leave a comment if you have a different method of valuation or have a more creative way to justifying $200M+ purchase price.



Top five web/internet companies acquired in 2007 - the year of the penguin.

mergeThanks to private equity firms, 2007 was an active year for M&A in general. But interestingly, in the web/internet space, most of the large acquisitions were done by Stretegics, the corporate acquirers, and not the private equity firms.

The sector that saw the highest activity was the Internet advertising sector; aQuantive, 24/7, DoubleClick, Right Media and a long list of others were acquired this year.

Here are the top 5 acquisitions in the Web/internet field.

gear(1) aQuantive - Microsoft : $6B. aQuantive is a digital marketing and technology company. It is now part of Micorosoft’s Advertiser and Publisher Solution group.

gear(2) WebEx - Cisco : $3.2B. Webex is a leader in the online video concerning. Cisco’s mantra? "Unified communication". Hmm, where have I heard that before?

gear(3) Double Click - Google : $3.1B. The deal is not complete yet but it was approved by FTC. DoubleClick develops and provides internet ad serving service. Google + DoubleClick will rule most of the clickable space on a webpage.

gear(4) Club Penguin - Disney : $700M. Club penguin is a virtual world for kids. Social Web - start them when they are young.

gear(5) Right Media - Yahoo : $680M. Yahoo already owned 20% of Right Media and purchased the remaining 80%. Some suggest that Yahoo purchased Right Media in response to Google’s DoubleClick purchase.

Some other notable acquisitions of 2007 are:

ImagePostini - google : $625M. Postini is an e-mail and communication security company.

Image24/7 real Media - WPP : $649M. 24/7 is a significant player in the online advertising marketplace.

ImageZimbra - Yahoo : $350M. Zimbra provides online office software.

ImageAdult Friendfinder - Penthouse : $500M. Adult FriendFinder is an an online adult dating site.

ImageHow Stuff Works - Discovery : $250M. How Stuff works has expanded in to online video instructions.

ImageAmerican Greetings - Webshot : $45M. This was notable because CNET purchased Webshot for $70M not too long ago. I still remember the time when Webshot was a wallpaper site.

ImageBusiness.com - Donnelly : $345M. From a directory serving Google text ads to the sale at $345M was remarkable.

Image Lexico - Answers.com : $100M. Lexico owns dictionary.com and thesaurus.com. This deal was notable because Answer.com paid almost $10/unique visitor - that is on the rich side for sure.

For a more detailed list, see PartnerUp and seeking Alpha and DealBook.

These are large numbers, but they dwarf compared to the attempted acquisition of Rio Tinto (international mining company) by BHP Billton (world’s largest mining company)for $140B.



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