Tech M&A: Going down, down, down

Investment bank Jefferies recently released a report on technology M&A in the first quarter of 2009. As one can imagine, there are few surprises. We may as well give you the highlights here, which point to some signs of recovery compared to the end of last year, but clearly there’s still a long way to go:

    The number of tech deals in North America fell 4 percent to 373 in the first quarter from the fourth quarter of 2008. It’s the lowest level of activity in five years, but at least the drop is a manageable 4 percent — in the December quarter, the number of deals dropped 23 percent from the third quarter of 2008. The aggregate value of North American M&A transactions was $4.3 billion in the first quarter, also a 4 percent drop from the prior quarter and an 85 percent plunge from the first quarter of 2008. Not a single tech IPO priced in the U.S. market during the quarter. The biggest tech deal announced in the quarter was Autonomy’s purchase of Interwoven for $764 million. The first quarter of 2009 has only three transactions greater than $500 million, compared to 10 such deals in the year-ago quarter.

The Jefferies survey also looks at tech M&A in Western Europe, which presents a similarly gloomy picture. Nine of the top 10 Western European deals in the first quarter were cross-border, and four of them involved U.S. buyers. The aggregate deal value fell 80 percent to $1.8 billion compared to the fourth quarter of 2008.

But it’s interesting to note that the mix of deals in the software, services and media sub-sector hasn’t changed much quarter to quarter. For example, IT services deals have hovered at about 30 percent of total transactions for the past five quarters, while digital media M&A has ranged from 32 percent to 35 percent of total deals in the same period.

Based on the grim experience of the first quarter of this year, Jefferies predicts there will be fewer than 1,500 deals this year in North America, a decline of 22 percent from 2008, which saw 1,919 deals. In terms of aggregate value, the bank expects only $17.2 billion, a 79 percent drop from last year, and nowhere near 2007, when the total deals announced were collectively worth $191 billion.

(Chart: Jefferies)

Twitter, from poor man’s email to innovation leader

He once called Twitter the poor man’s email. But to hear Google CEO Eric Schmidt today, one would be forgiven for thinking it’s the next big thing.

Schmidt’s comments on the microblogging site are picked over with the kind of meticulous care often associated with neurosurgery, simply because Twitter is often rumored to be a Google acquisition target.

On Thursday, In an apparent reversal of his earlier pooh-poohing, Schmidt declared Google to be open to some sort of advertising partnership with Twitter.

Google still king of search, Microsoft grows faster

Google remains the undisputed leader in U.S. Internet searches, but Microsoft can claim it is the fastest-growing, according to the latest figures from digital tally-keeper comScore.

Google claimed 63.7 percent of “core” U.S. internet searches in March, not counting mapping, directory or video sites like YouTube. That is up 0.4 percent from February.

Meanwhile, Yahoo and Microsoft, which are still umming and ahhing about combining their internet search efforts in some way, traded some gains and losses.

‘Overpayers’ social network

sorrell2.jpgAre Microsoft and WPP gearing for an asset swap?

Advertising Age’s Abbey Klaassen is reporting that the two companies — criticized for overpaying for their respective digital advertising acquisitions — have rekindled six-month-old discussions to scratch each others itch.

Microsoft may possibly be seeking to shed its Avenue A/Razorfish, one of the units of aQuantive it purchased last year in a $5.9 billion deal. Avenue A accounted for about 60 percent of aQuantive’s revenue. But getting anywhere close to $3.5 billion would be far-fetched. The division’s market value is close to $800 million, Klaassen calculates.

Enter WPP’ s Martin Sorrell, who has also sought to unload Open AdStream, the ad-serving division of 24/7 Read Media, which WPP purchased for $649 million.

Reliance ADA targets all screens

reliance-anil-ambani.jpgEven before a deal to bankroll Steven Spielberg and David Geffen’s new studio has closed, India’s Reliance ADA Group is now on the hunt for U.S. mobile content publishers including game makers, according to the Wall Street Journal.

“The thought is to build a distribution model across the world,” Rajesh Sawhney, president of Reliance Entertainment, a unit of Reliance ADA, told the Journal. “For the content we’re acquiring now, we want to exploit it globally.”

Reliance hired Silicon Valley consultants VSC Consulting to scout out targets. The Mumbai-based conglomerate is also seeking to license content from big producers. This all comes on the heels of signing deals with eight Hollywood production house run by the A-listers George Clooney, Tom Hanks and Brad Pitt.

Take-Two to EA: Check us out in private


Video games company Electronic Arts has just updated Wall Street on the latest stage in its drawn-out $2 billion bid for Take-Two Interactive Software with news that it will allow its tender offer to expire at midnight New York time.

But Take-Two, maker of the Grand Theft Auto video game franchise, said it is now willing to provide a management presentation to EA containing non-public information in connection with the bid such as its three-year product release schedule and financial projections.

EA and Take-Two’s chief executives exchanged letters over the weekend and had a phone conversation on Friday.

Gabelli to Cablevision: Stop teasing!

gabelli.jpgIs silver-haired media investor Mario Gabelli playing matchmaker?

In an interview, he says that it’s about time Cablevision get down to business and hook up with Time Warner Cable. Gabelli, who runs hedge fund Gamco Investors,  a top Cablevision shareholder, tells Bloomberg the family run cable operator and networks company should be “making love with Time Warner Cable.”

Gabelli’s proposal goes much further than the potential moves proposed by Cablevision CEO Jim Dolan. Not content with just a stock buyback or a dividend or even just spinning off some businesses, Gabelli suggests Cablevision should do nothing less than break up the company and hand over the cash to shareholders.

It’s no secret how Time Warner Cable has coveted Cablevision’s New York area cable systems. On more than several occasions over the past decade, Time Warner has held talks to varying degrees to snatch the systems.

AOL trims for sale?

randyfalco.jpgTechCrunch‘s report on AOL’s “sunsetting” of Xdrive, AOL Pictures, MyMobile and Bluestring spread like wildfire yesterday, at a time when the future of its ownership hangs in the balance.

Are these latest actions in anticipation of an AOL sale? Actually AOL’s been trimming for some time. Who hasn’t, given the state of the economy. You just haven’t noticed.

About 50 products including a video download service, a 10-foot UI experience (Internet in the living room), AIM phone line, and Tegic, have been “sunset”, we’re told.

Microsoft’s next online chief

jonmiller.jpgMicrosoft’s president of platforms and services Kevin Johnson, who spearheaded the company’s pursuit of Yahoo, plans to bolt for the top job at nearby Juniper in a move that deals a setback to the software giant’s online chase after Google.

AllThingsD’s Kara Swisher comes up with a shortlist of candidates from her sources that include a roster of insiders, led by aQuantive’s Brian McAndrews, with SVP Satya Nadella, who will run search, MSN and ad platform engineering efforts in a new reorg, and Strategic Partnerships SVP Yusuf Mehdi, who has previously led online businesses at Microsoft, considered long shots.

Heading the list of external candidates is former AOL Chief Jon Miller, who also happens to be a candidate for Yahoo’s board after activist investor Carl Icahn settled with Yahoo this week.

Yahoo settles with Icahn

icahn.jpgIs Yahoo letting the fox in the hen house or did activist investor Carl Icahn settle after eyeing weakness in his campaign?

Whatever the case, Yahoo’s settlement with Icahn, who had planned to run a rival board slate but now gets three board seats including himself and possibly former AOL Chief Jon Miller, averts what was expected to be a bloody battle on Aug. 1.

Miller, who was pushed out of the Time Warner division, was responsible for turning the subscriber-losing AOL into an Internet company after dismantling its walled garden.