Archive for ChinaHR

Digital Media M&A

Posted in Deals, Digital Media, News with tags , , , , , , , , , , , , , , , on October 10, 2008 by Dave Liu

eBay Pays $945M For Bill Me Later; Buys Two Danish Sites For $390M; Cutting Staff By 10 Percent — eBay (NSDQ: EBAY) announced two acquisitions—spending over $1.3 billion altogether—this morning designed to shore up its other parts of its business in the face of declining profits and stagnant traffic at its primary online auction site. The company also finally addressed layoff rumors and said that it is indeed cutting 10 percent of its 15,000-person workforce. The company said about 1,000 full-time jobs will be affected, in addition to several hundred temporary workers and the elimination of open positions. The two acquisitions and the layoffs were summarized in a single release, with two others containing additional details.

Local Online Research Firm Kelsey Group Bought By BIA Financial Network — Kelsey Group, a Princeton-based provider of research and consultancy services in the local media space, including online (we have quoted their work many times over the years), has been acquired by Chantilly, VA-based BIA Financial Network, the financial and strategic consultancy firm for media and communications industries. Financial terms were not disclosed. Kelsey will operate under the newly formed subsidiary BIA Advisory Services, which will also include BIA Consulting and BIA Research. John Kelsey, who founded the group in 1986 with his wife Pam, will oversee conference planning and execution. More details in release.

Aegis Buys Environmental Marketing Company — Media buying and planning firm Aegis Group’s latest acquisition is a little off the beaten path. It has bought fellow London-based company Clownfish, which helps advise marketers on crafting more eco-friendly, “sustainable” initiatives. The acquisition’s terms weren’t detailed, though Aegis said Clownfish has $880,000 (£500,000) in gross assets. While the purchase would seem to have little to do with digital media, Aegis insists that it does. Clownfish will be folded into Aegis’ Isobar search ad network, as the company says it sees a clear relationship between the online and environmentally sound business practices. Overall, Aegis has been stepping up its buying activities lately. Last month it bought U.S.-based search engine marketer Range Online Media for Isobar, its sixth acquisition this year.

VeriSign Exits Mobile Content; Sells Remaining Stake In JV To News Corp For $200 Million — VeriSign’s effort to capitalize on mobile content through its acquisition of Jamba is officially over. VeriSign tried to keep skin in the game through a JV with News Corp (NYSE: NWS). selling 51 percent in May 2007 for $187.5 million and a merger with Fox Mobile Entertainment. Today, the two companies said VeriSign has sold its remaining 49 percent to News Corp for approximately $200 million, suggesting that the value of the JV, which has struggled with leadership and strategic issues, has been static at best. VeriSign’s sale has been expected for months given the company’s switch to a core focus on internet infrastructure. VeriSign acquired German mobile content company Jamba in 2004 for $273 million.

Monster Acquires Remaining 55 Percent Of ChinaHR For $174 Million — Monster.com has full ownership now of major Chinese recruitment site ChinaHR.com, spending $178 million on the 55 percent it did not already own. Monster acquired 40 percent in 2005 for $50 million with a promise that it could get the remainder if ChinaHR failed to do an IPO within three years, according to TradingMarkets.com. As recently as mid-September, ChinaHR president Zhang Jianguo held out hope that the company would finish its IPO plan before year’s end. The acquisition gives Monster a major presence in online recruiting in Asia as well as China. Monster moved quickly to put its stamp on the company, appointing Edward Lo, EVP, Monster Greater China, as interim CEO of ChinaHR; he’ll keep his Monster regional duties as well. But it’s far from a slam dunk. As TradingMarkets.com notes, China’s growth is slowing and the sites face challenges from smaller companies, more localized companies with less overhead.

TNS’ Saga Nears Its Close, As WPP Declares Victory — WPP Group says it’s ready to close the deal for its $2 billion (£1.14 billion) takeover of TNS Media Intelligence, having received the support of 82 percent of the audience researcher’s shareholders, Reuters reports. The is now unconditional, though the extended offer period for further acceptances is open until Oct. 22. WPP will no longer offer the option to mix and match the share to cash ratio, however. As more shareholders shifted their support to WPP over the past week, TNS finally dropped its opposition to the deal on Monday, though it continued to maintain the WPP’s bid undervalued the company. Executives at the UK media measurement firm said they were in an untenable position, as continued attempts to block the takeover would have left TNS investors holding on to a minority interest in an unlisted company.

Baidu: “We’ve Seen This Movie Before”

Posted in China, Deals, Digital Media, Investment Banking, Media, News with tags , , , , , , , , , , , , , , , , , on August 11, 2005 by Dave Liu

I was interviewed for the following article which was written by Steve Rosenbush and published by Business Week on August 11, 2005.

Investors hope it’ll be another Google, says China tech banking expert David Liu. But he warns that it’s “hard to pick winners in tech” The initial public offering of Baidu (BIDU ), the Chinese Internet search company, shattered records on Aug. 4. It was the most successful Nasdaq IPO in five years, rising from $27 to $154. While the stock price has settled back at $91, the company has recast the perception of the Chinese Internet market. Valuations of Internet companies, and search companies in particular, are on the rise.

Now, big players from the U.S. are pouring into the Chinese market. Google (GOOG ) has a stake in Baidu. Yahoo! (YHOO ) is said to be in talks with e-commerce site Alibaba, eBay (EBAY ) has acquired Eachnet, and MSN has its own operations in China (see BW Online, 8/11/05, “There’s More Where Baidu Came From”).

David Liu, managing director of China tech banking at Jefferies & Co., expects valuations to keep rising in the wake of the Baidu IPO. He spoke about the Chinese tech market with BusinessWeek Online Senior Writer Steve Rosenbush. Here are edited excerpts of their conversation.

Q: How would you characterize Baidu’s valuation?

A: By any conventional standards, the valuation looks very high. Its valuation is higher than Yahoo, Google, or eBay. To justify this valuation, Baidu needs to grow faster than Google.

Q: Why did Baidu’s value reach its current level?

A: The valuation of Baidu was driven by a “perfect storm” of investment conditions. There haven’t been that many IPOs, and the market is starved for good growth ideas.

Lots of investors have been kicking themselves because they didn’t buy Google when it was in the 80s. It’s 300 now. We’re also seeing rapid growth of the China market. It’s a very large opportunity. It’s the second largest Internet market in the world, and over the next two years, pundits believe, it will become the largest Internet market in the world.

The valuation of Baidu was also driven by the rapid growth of online advertising and revenues related to search. And the nice thing about Baidu is we’ve seen this movie before — in the U.S. Everyone believes the same movie is going to play out in China and that Baidu will do as well as Google.

Q: But is the current valuation justified?

A: The company hasn’t disclosed forward-looking revenue numbers. The analysts who worked on the deal are in a quiet period, and we won’t see anything from them until 40 days after the IPO, or early September. Those reports will show their view on Baidu’s projections. Once the numbers come out, we can figure out whether the company’s projected growth justifies its current valuation.

Q: How will the Baidu valuation alter the outlook for M&A and IPOs in China?

A: There’s no doubt the Baidu IPO will affect companies that are in a related space, like Alibaba. Any Chinese search company today is going to look at the Baidu situation and start thinking more about launching an IPO than pursuing an M&A.

Baidu will have an effect on the broader market, too. There are only 30 China-based tech companies on the Nasdaq. That’s a very small sample, so every single deal has a meaningful impact on expectations. If you’re a China-based tech company looking to sell or go public, an event of this magnitude heavily skews that sample and what you think the value of your company is. In my opinion, the Baidu IPO pushes valuations beyond the point where many M&A deals can get done.

Baidu clearly affects companies with one degree of separation — those that are rivals of Baidu. And it affects the valuation of Internet companies, or companies with two degrees of separation. They will argue that they make their money by monetizing traffic, just like Baidu.

Tech companies, which have three degrees of separation, will argue that they’re tech market leaders, just like Baidu and deserve a similar valuation. And companies with a fourth degree of separation, which operate beyond the tech market, will argue that they deserve a valuation comparable to Baidu, too. But I think these arguments lose credibility unless the company is a search company or an Internet company.

Q: Can you be more specific about how Baidu will change the outlook for M&A and IPOs in China?

A: Baidu will have the biggest impact on search companies like Sina and Zhongsou, which compete directly with Baidu. It also may have an effect on companies like Alibaba, the b2b site. While Alibaba may be in talks with Yahoo, it’s unlikely to sell out entirely. It may sell a piece to Yahoo, then go public, just as job site eLong sold a piece to Barry Diller’s IAC/Interactive before it went public. [eLong was acquired by Interactive and is now part of spinoff Expedia.]

We’ll see more two track deals like this. M&A is difficult in any market growing this fast because the seller thinks it’s going to keep growing like crazy, and the buyer thinks expectations are too high.

Other companies on the cusp of M&A or IPO include China HR, the job site. Rival job site 51job (JOBS) went public last year. It was the second-best performing IPO on the Nasdaq. Another job site, Zhaopim, may also be close to IPO or deal. The same is true for Soufum, the real estate site. But once you get beyond search and Internet sectors, the influence of the Baidu IPO really starts to wane.

Q: Is there a danger that an M&A/IPO bubble is forming in the China market?

A: Valuations are based on a company’s future growth. If these companies perform well, the valuations will be justified. If they don’t, valuations will come down. That’s why quarterly performance is so important. These kinds of businesses are so new in China.

But there will be a new Google, a new Yahoo, and a new Microsoft that comes out of China. And these market leaders will justify their valuations. But these companies are relatively small, and it’s hard to pick which ones will be winners. That’s why investors get paid so much money. It’s particularly hard to pick winners in tech, which tends to be a winner take all market.

Q: Will Baidu be a winner?

A: It has the lead right now, but someone else could come along. Google wasn’t the first search company in the U.S., or even the second or the third. And most of those early leaders aren’t around today.