George Parker over at AdHurl got me thinking today about the valuation of the iVillage (Nasdaq: IVIL) acquisition by GE (NYSE: GE) unit NBC Universal for $600 million. The deal implies a multiple of almost 8 times revenue and 300 times trailing earnings.
That said, given the average analyst estimates for 2007 earnings, the price reflects more reasonable forward earnings multiple of about 26.
The deal price of $8.50 per share is just below the high price of the stock in 2004, suggesting that a shareholder has had the money parked for the last two years.
The import of the these metrics on M&A deals for similar companies suggests that valuations remain rich, but reasonable. Reports on the web suggest that iVillage management had hoped to get up to $200 million more!
For earlier stage businesses, the message seems to be the market for exits remains strong enough to support good valuations, especially for later stage venture rounds.
This article from the Washington Post also sheds light on the transaction.
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I don't think the price is outrageous given the attractive demographic that iVillage reaches. I'd be concerned about the integration of iVillage into the NBC family (culture shock). My guess is the key players at iVillage won't like working for a large organization. I think you're going to see some of the niche content players like The Knot, CNET, and Planetout acquired in 06. They each target very specific niches well.
Posted by: Bconnery | March 8, 2006 9:59 PM | Permalink to Comment