Latest Market View
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Revenue vs Income Multiples in Valuing Web Businesses Jan 18, 2011
Companies are valued according to the cash flow they generate. Cash flow is a “net” number, just like accounting profit is a net number. If value is derived from a net number like cash flow, why do so many web businesses valuations use a multiple of revenue?
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The answer is that that a gross number like revenue is easier for a buyer to understand and interpret. A net number like cash flow is too subject to manipulation. It requires too many adjustments to be normalized. -
Shake up Coming in the Cloud Jan 18, 2011
There is no doubt that 2010 was the year of the “cloud” when it comes to Internet computing. Web applications also multiplied like spring rabbits. That means there is plenty of duplication in the space, with thousands of players carving out market share in a highly fragmented market. The time is ripe for consolidation at all levels.
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2011 Should be a Banner Year in Web Business M&A Jan 18, 2011
Is the white knuckle era over when it comes to business expansion? Since Sept 2008 uncertainty has gripped the North American business community. And when companies get nervous, they stockpile cash and limit employee growth. In short, they hunker down.
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Understanding Strategic Buyers Jan 18, 2011
How many times have web business owners asked us, usually in complete confusion, why potential buyers for their business negotiate so hard for a valuation that is 1 times revenue, when they know other web business owners ask for—and get—multiples that are 4, 5, or 6 times revenue… or in some cases much higher. What gives?
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Internet Bubble 2.0? Jan 18, 2011
One thing the mortgage meltdown of 2008 accomplished was entrenching the word “bubble” into the business vocabulary of investors and business builders. We all know by now that the real estate bubble of 2000 to 2008 was created by the Fed’s “easy money” policy, which the Fed introduced to help investors recover from the bursting of the Internet bubble in 2000.
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