Internet advertising technology specialist DoubleClick has become the latest high-tech company to fall into the arms of private equity investors.
The New York-based company, one of the pioneers of online marketing, was sold yesterday by auction for $1.1 billion to private equity firm Hellman &Friedman.
The sale – at a 15% premium to DoubleClick’s stock market valuation – not only suggests growing confidence in the online advertising sector, but underscores a fundamental shift in the patterns of ownership and funding in the technology sector.
In the past six weeks alone, private equity firms have snapped up a clutch of high profile technology companies, including thin client vendor Wyse Technologies, host access software vendor Attachmate and web analytics vendor WebTrends.
Topping these was March’s $11.3 billion buy-out of financial sector IT services company SunGard by a consortium of equity firms – the largest ever private acquisition of any technology company.
The spate of acquisitions indicates that private finance groups, awash with cash in a dead IPO market and unable to find enough vehicles for venture funding, are increasingly looking to milk established and stable technology companies.
There are some clear advantages of private ownership: for one, companies can sidestep the onerous regulatory obligations placed on those with a public listing; they can exert greater autonomy in decision-making and avoid the pressures of quarterly reporting cycles; they can leverage the assets of other companies held in the same investment portfolio; and, being private, they need not disclose how much they are spending on R&D or how much profit is being passed on to shareholders.
Certainly WebTrends feels relieved to be away from the scrutiny of Wall Street. Commenting on the acquisition, the president of the Web Analytics Association, Jim Sterne, told Infoconomy: “Sarbanes-Oxley is now off their backs; they don’t have to report to a board, so they can just go off and make decisions. They still have the [equity-investor] owners to answer to, but essentially it has taken off the fetters and let them run with it.”
And others expect size to be no object in future deals. “Sungard [was] a milestone. It shows no technology company should think of itself as too big to be bought out,” said Alex Slusky, managing director of software buy-out firm Vector Capital.