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2011 Should be a Banner Year in Web Business M&A

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.

But it has been almost 2.5 years, and the cash has piled high in corporate accounts, with just over $3 trillion socked away. Add historically low interest rates, and the environment is ripe for a wave of acquisition activity that could lead to 2011 being the best M&A market in years.

A recent mergermarket.com survey reported that 82% of U.S. executives expected an increase in merger activity over the next 6 to 12 months. U.S. corporations have the means, motive, and opportunity to grow by acquisition this year, and that means M&A should be on the uptick.

Part of the motivation fuelling potential acquisition activity is a general sentiment that large corporations still struggle with innovation. The “make or buy” innovation decision at many large firms has swung firmly over the buy side.

In addition, the cash piling up at hedge funds should apply some nice upward pressure on selling prices, as corporate and financial buyers chase the best opportunities.

The only ballast holding the M&A balloon on the is the general uncertainly associated with high unemployment levels. We aren’t on the verge of embracing irrational exuberance any time soon, but if a couple of employment indicators show steady improvement, the flood gates might swing wide open, returning us to pre-2008 levels.

We think the general positive market dynamics for M&A activity are multiplied in the web space, where so many large companies are playing catch up in fully embracing social marketing as a business strategy.

We think there are at least a couple of dozen established web properties that will be gobbled up this year, with many benefiting from an auction-like selling environment.

If you have an established web business with a history of earnings, you ought to get your company spruced up enough to enter negotiations if the right offer comes along. You don’t need to actively shop your business, just take the Boy Scout motto seriously… BE PREPARED!

We predict above average M&A activity this year, and who knows… you might be part of it.

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