At least 210 internet companies folded in 2000 while the number of
mergers and acquisitions was double the 1999 level according to new
reports by a San Francisco research company. Nearly 60% of the
closures occurred in the fourth quarter of the year. 75% were in
the B2C sector.
According to the two reports by Webmergers.com, the 40 shutdowns
that took place in December accounted for at least $1.5 billion in
investments. The reports only studied what Webmergers.com describes
as “substantial” internet companies.
E-commerce players accounted for 109 shutdowns, or just over
half of the total. Content properties made up another 30% of the
total while infrastructure and on-line services companies accounted
for the remainder. Between 12,000 and 15,000 employees lost their
jobs as a result of the company closures, according to
Webmergers.com estimates.
Consolidation grew rapidly last year. M&A spending reached
$87 billion in 2000, 85% above 1999 levels. The number of deals
doubled from 1999 to 910 in 2000 although total M&A spending
eroded steadily as the year wore on; the first quarter accounted
for 60% of the spending in the year while the fourth quarter
accounted for only 6%. Against that decline in total spending, the
number of deals remained strong, slipping only 15% from a high of
244 in the second quarter to a low of 211 in the fourth.
The M&A report observes:
“The dramatic quarter-by-quarter decline in
total spending was due in large part to the severe erosion in
valuations of Internet companies that continued throughout the
year. For example, About.com, which was acquired by Primedia in
October for $690 million, had sported a market valuation of more
than $2 billion at its trading high in mid-March. Declining
valuations were a two-edged sword this year because they also put a
damper on acquisitions by large players such as WebMD, which had
used their richly valued stock to dominate M&A activity in 1999
and in Q1 of 2000.
“While last year also saw the death of more
than 175 internet destinations, about five times as many dot.coms
made it to the altar as they did to the mortuary in the 12-month
period.”
The M&A report omits the $157 billion AOL/Time Warner deal,
the size of which would obscure meaningful trends.
