Can Business.com really get a 26 multiple on profits?

Answer:
It's hard to say if someone is willing to pay a

26 time multiple on profits. For those of you not aware, Business.com is currently up for sale. They are seeking somewhere in the neighborhood of $400 million. Their EBITDA is around $15 million per year so the acquiring company would need quite the grand scheme to elevate revenues where a 26 multiple ROI is achieved in a timely manner.

Although high, a multiple of this sort isn't terribly uncommon. Most large, publicly held companies, investment banks or "big players" have equations and the acquisition usually compliments the acquiring companies current or future service offerings.

These large multiples usually come from the tech community. A new product or service offering that hasn't seen it's potential is sometimes a good buy at 26 times profit. Ebay purchased Skype, a VOIP company for $2.6billion. I don't recall the multiple but it was ridiculous. The difference between the Skype deal and the Business.com deal is that Skype was an emerging technology and eBay thought it could get it early and offer an attractive multiple before the company was out of their price range.

Business.com is basically an arbitrage portal with it's own PPC back end. I don't know how much of their revenues are from their own PPC account holders but they sure show a lot of Google ads. So they bid arbitrage terms through Google and other se's and their revenue model is through their own PPC account holders and Google. I could see if they had a ton of PPC account holders generating a large portion of the revenue that this would be an attractive deal to several companies but I have a feeling that they make more through Google clicks then their own. Most small or niche PPC engines have significantly lower PPC's than the large engines. This is due to the volume and quality of traffic. If the volume isn't there you won't get bidders.

So I don't believe they are cutting edge nor do I believe they are in an emerging market. Lastly, they don't really have a niche cut out. Sure it's Business.com and they coin it to be a Business directory of products and services but it basically a search engine. You can find anything you want thats non-business related.

FYI, Business.com was sold for $150,000 in 1997 later to be resold for $7.5million in 1999. Thats a pretty solid return on investment and perhaps the current owners are attempting to keep that super high multiple in check for this acquisition as well.


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