Internet Brands Acquired In $640 Million Deal

[travelin cat]

Internet media company Internet Brands this morning announced that it has entered into a definitive merger agreement to be acquired by an affiliate of private equity investment firm Hellman & Friedman Capital Partners VI in a transaction valued at approximately $640 million. [techcrunch.com...]


Bob Brisco's blog:

http://www.bbrisco.com/2010/09/inet-to-go-private.html

We take pride in our NASDAQ performance and shareholder returns. At the $13.35 offer price, our stock would have appreciated roughly 67% from our IPO. That compares to an overall NASDAQ decline during the same period of roughly -10%. Our management team is proud of our performance and I am proud of them. We are blessed with a great team.

So, why potentially go private again? Because we believe this would be a good deal for our shareholders. Because we would continue to build one of the finest New Media companies in the world and become even more focused on long-term growth. Because H&F would be a great partner. H&F has impressed us with their knowledge of New Media, and with their professionalism, focus, and intensity. H&F Managing Director Andy Ballard has been an absolute pleasure.

[edited by: Brett_Tabke at 6:08 pm (utc) on Sep 20, 2010]
[edit reason] added link [/edit]

[Webwork]

[webmasterworld.com...]

[maximillianos]

Wow that is a steep price for a company that is pulling in 20 million/profit a year. That is 32x annual profit.

The revenue multiple is more reasonable (about 5X).

This is interesting because I'm in talks to sell one of my sites and the firm keeps on harping on sticking to a 4-5X multiple of my revenue, but my site is 99% profit off those revenues... So in my opinion it is worth a higher multiple.

This potential sale surely proves my point.

[Brett_Tabke]

Total revenues for the second quarter of 2010 were $28.1 million, a 21% increase from $23.2 million in the prior year period.
Record Adjusted EBITDA: $11.7 million in second quarter...
Net income for the second quarter of 2010 was $4.6 million...

Total monthly unique visitors to the Company's network of websites grew to a monthly average of 62 million in the second quarter of 2010.

[investors.internetbrands.com...]

[np2003]

Some of their showcase sites like Loan.com, Autos.com.. Alexa shows rank at over 100K+ for those sites.. hrmmmm not many visitors...

[Sgt_Kickaxe]

Loans and cars are two extremely tough nuts to crack if you're needing natural search traffic, the competition is extreme and if it wasn't hard enough to get top rankings for related terms search companies position themselves between the sponsored links and top natural spot.

[indigojo]

They do own vBulletin but also an awful lot of bad websites that they appeared to have paid too much for if you go back through their historical PR section. Looks to me like they have made lots of acquisitions with earn outs or even keeping the individual webmaster on board which surely is going to be problematic at some point. This one made me chuckle "puppydogweb"!

[maximillianos]

They seem to gave a pretty high overhead for running a hundred websites that largely are organic and many user-generated in nature.

[Brett_Tabke]

They also own "FlyerTalk.com". By some independent accounts, it is the most profitable forum on the web by an order of magnitude. eg: take all of INETs other forums combined, and they don't make as much as FT. Flyer talk is the Hope Diamond of web forums.

INET's real expertise is in running forums profitably. They have acquired under producing site after site and turned them around over just a couple of years. There are no issues in doing that. You need look no further than WebhostingTalk and Abestweb.Com. Both have been acquired and both are running good after the take over.

[maximillianos]

I've heard the same about the FlyerTalk. It appears to be what all community driven sites aspire to be. Quite an achievement.

Don't get me wrong, I am a huge fan of Internet Brands, and thought Bob Brisco's sessions at Pubcon were the most interesting sessions I've seen in my 3 years of going to Pubcon. Very happy for them to get such a great purchase price.

[rogerd]

This should be inspiration to community builders!

1) Yes, it IS possible to monetize a community.
2) If you create a successful community, others will see value in it. (Sometimes.)

Well done, Bob & IB!

[walkman]

I have read many complaints from site owners that sold to I Brands: one sites went downhill, two they (claim that they) were cheated out of their fair share. See one for example [flyertalk.com...]

Overall I think they lost a lot of money, Carsdirect alone had gotten hundreds of millions, at least $310m, in venture capital.


Bret, unless you know it for sure, I have a feeling that WebhostignTalk makes a fortune and probably more than FT. Hosting ads pay a lot!

[Swanny007]

Brett, I think you're making an assumption on that trademark topic. I happen to personally know a guy who sold a big site to them. Things didn't work out 100% as they were supposed to but things were "close" by the time the contract was all said and done.

I've been approached by them too, interested in buying my largest site. Sorry but I've been running it for 10 years and every year is $$ better than the last. I can easily keep it going another 10 years, I figure. Not worth the "quick bucks" to be made by selling out.

You can pretty much find a "the new site sux" thread at most of the forums that they bought out and took over. I can give specifics here but I'd rather not.

[setzer]

They do own vBulletin but also an awful lot of bad websites that they appeared to have paid too much for if you go back through their historical PR section. Looks to me like they have made lots of acquisitions with earn outs or even keeping the individual webmaster on board which surely is going to be problematic at some point. This one made me chuckle "puppydogweb"!

Have you seen the vBulletin customer forums lately? It's a sinking ship.. people are leaving for other software in droves.

[shri]

>> It's a sinking ship.. people are leaving for other software in droves.

I'm afraid this acquisition will drive more customers like, who were hoping they'd get their act together and produce a 4.0 which was just as functional as their 3.0 software.

With a new transition, I can see an even bigger loss of focus.

Awesome job on the community side though..

[Brett_Tabke]

Lets see, you take stock at $3-$5 per share and it sells at $13.50. Ya, I think those guys that sold sites to IB are probably pretty happy with a 3 to 4 fold increase in their stocks net worth overnight.

> WebhostignTalk

Is owned by INET Interactive out of Dayton Ohio [inetinteractive.com...] . They also own sites like Hotscripts, ABestWeb, DB Forums, OC Forums, and HostingCon. A similar conglomerate play like IB, but a different company. I just used those 2 forums as examples because they are running so smooth after transition.

> vBulletin customer forums

Upgrades are always a contentious issue with software. It is rare to find software that transitions without issue. That is specifically true for cms systems. The huge change that was v3 to v4 could not have happened any other way. The adoption of 4.0 is the highest in the history of VB. It has been very profitable for IB.

VB4 extends VB into a new category of software - CMS's and Blogs. v4 extends VB into a new category of software. There is a whole new crew of bloggers that are picking VB over other cms systems. This has opened up VB to a whole new customer base and that base is paying off.

[shri]

>> VB4 extends VB into a new category of software - CMS's and Blogs.

Good for you Brett. :)

[motorhaven]

>>>Lets see, you take stock at $3-$5 per share and it sells at $13.50. Ya, I think those guys that sold sites to IB are probably pretty happy with a 3 to 4 fold increase in their stocks net worth overnight. <<<

They are cash buy-outs with earn-outs for many of them in subsequent years. No stock options, so you missed the target on that comment. Quite the opposite situation exists for many of the owners, they've been screwed on earn-outs due to failure to maintain/update the sites (IB suddenly gets busy on them after the lawyers are brought in and in at least one case started back-dating new content).

[Brett_Tabke]

I know most of IB's acquisitions are done with stock as a basis.

> earn outs

Are always dicey.

[motorhaven]

Question how do you know this? Talked to the former owners, or is it a stock report? I'd be interested in seeing the data, percentages, etc. I know that none of the former owners I talked with were giving stock or stock options. Also, the stock was selling for a little over $11 not long, doesn't seem to me the stock holders are getting a premium price.

[Brett_Tabke]

> Talked to the former owners

Yes. Several of them frequent PubCon and word gets around.

> for a little over $11 not long

It was in the $5 range when IB did a large number of acquisitions late 08-on into 09.

> stock holders are getting a premium price.

They also took it very hard over the auto turn down in late 08. There were days when I am sure the fear of closing the doors was kicked around at meetings. So for them to make a comeback to $13+ is impressive.

It is a roll-up vertical play. Without a big cash cow in the bunch that generates 95% of the income - vc friendly multiples just aren't going to be there.

[motorhaven]

I guess it depends on who you talk to. I didn't get options or stock, and neither did the many former owner's I've conversed with. I'm not of the opinion that closing the doors was ever discussed, IB has pretty much shown a profit after going public. IB keeps their overall overhead low by (my opinions):

a) Not putting much money into the sites after acquisition in the form of updates, etc. -- this is one of the big reasons they've had many former owners go with legal plays. The mistakes, lost documents, lies, deadlines missed and failures to put effort into sites was common when I dealt with them.

b) They bottom feed salaries. Employee turnover is high and moral is low - one of their people in charge of content on one of their largest verticals told me the IB office doors are a revolving door, both literally and figuratively. Pretty much everyone I talked with on a personal basis when I could get candid opinions felt IB must be trying to pump everything up before it fell apart so they could get acquired: Mission accomplished.

c) They mis-classify some people as contractors but treat them as employees. Requiring reports, meetings, quotas, etc. which are also required of employees. I'm not sure how many, but some are even given business cards which seem to imply they are IB employees ("Internet Brands Senior Advertising Account Executive").

d) Churn and burn acquisitions without the long-term view. Take on a site and raise the ad rates through the roof. In some cases the advertisers don't have much choice because IB buys the site's major competitors as well. Advertisers who have been with the sites for years leave, but IB push their sales people extraordinarily hard to replace the loses, building up short term income at the expense of not keeping advertisers long term.

Am I glad I sold? You betcha. I got out of the rat race and made a good chunk of money. This has allowed me to grow other businesses, take some much needed time off to relax, start a couple of new businesses and look forward to earlier retirement. Would I do it again? Yes. But the terms would have been difference had I seen what went on in the company prior to the sale. Anyone who's considering selling to them should push for an all cash deal.

I've seen too much of what goes on inside to believe the hype IB and Bob puts out.

[nrep]

For those that have sold up to IB or iNet Interactive, what sort of valuation were you being offered (was it done as a multiple of yearly revenue?).

[walkman]

Churn and burn acquisitions without the long-term view. Take on a site and raise the ad rates through the roof.

Their strategy was to have a sucker buy them out, which worked out.

I too would like yo know how much was offered. No need to spill the guts but even a "Forum with about #*$!#*$! users, earning roughly this much, this traffic was offered about this much"