The Timing of the Deal

Has Facebook missed the M&A boat? An executive with the social-networking service apparently told BusinessWeek the company is seeking a $2-billion takeover deal after turning down a $750 million offer earlier. Of course, you can ask for the stars and the moon but it's a mute point if no one makes the right offer. Facebook's apparent desire for the pot of gold at the end of the rainbow does put the spotlight on the fine art of timing a deal. Skype (Niklas Zennstrom and Tim Draper) played the market perfectly by putting out the message the was company was for sale, setting a quasi-public price ($1-billion) and waiting for the suckers…er, I mean…buyers to emerge. It was a masterpiece performance. Vonage, on the other hand, has probably blown it. In a ideal world, it would have done an IPO when VoIP was red-hot a year or so ago. Instead – large losses, soft capital markets, etc. – Vonage waited. As a result, a $600-million IPO has turned into a $250-million S-1 filing that has mysteriously been collecting dust at the SEC. Does this mean Facebook isn't going to get $2-billion? Probably, but it depends on various factors: is there a buyer willing to pay the price, how does Myspace.com's growing success influence Facebook's value, etc. At the very least, the fact Facebook has tipped its hand in BusinessWeek means it wants a large audience to deliver its message or, as rumoured, it's been on the block for awhile and needed a new way to incite interest. It looks like they should have given Tim Draper a call before they hatched their exit plan.
   Facebook's plans are being picked apart in the blogosphere. Om Malik cites flat page views, reach and traffic trends while B2Day point holes at the $2-billion price-tag after doing some rough back of the napkin math. Michael Arrington, on the other hand, does not dismiss Facebook's desired valuation.