M&A Musical Chairs

After being outmaneuvered/outbid by Google for DoubleClick a few weeks ago, Microsoft has decided to use a portion of its mountain of cash – $6-billion to be exact – to purchase online advertising firm aQuantive. It’s the largest acquisition ever made by Microsoft, and clearly reflects a couple things: the growing bullishness about the online advertising market, and Microsoft’s desperation to grab a seat before this multi-billion dollar game of musical chairs comes to an end.

I don’t know too much about aQuantive other than it’s an excellent day to be a shareholder given Microsoft’s $66.50 a share offer is a staggering 85% premium over aQuantive’s closing price of $35.87 yesterday. Microsoft and aQuantive said they have “very complementary technologies”, which they better have in spades given Microsoft is spending some serious cash on the deal. aQuantive expected to have sales of $390-million to $405-million for 2007 – giving the deal a purchase price to rich sales multiple of about 15 times.

The acquisition comes in the wake of Google’s $3.1-billion purchase of DoubleClick and WPP Group’s $649-million deal for 24/7 Real Media Inc. With the online ad market so hot, it’s just a matter of time before the next deal emerges. If you own an online advertising firm or own shares in one such as ValueClick, it looks like you’re holding some sweet lottery tickets right now. For other views, check out Mathew Ingram, who suggests the deal reminds him of the optical-networking buying frenzy of the late-1990s.

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