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AOL Begins Acquisition Spree?

Tons of rumors that AOL is about to acquire Mashable.  In the context of those rumors, I heard comments about whether AOL is willing to write big checks – specifically implying that they were not, coming out of the layoffs, etc..  I have very little to add to the cacophony regarding that specific deal, but I do want to point out a few things that seem interesting to me:

  • If I had a newly public company that I was running (like, say, Tim Armstrong), and I thought my company was a mess (like, say, Tim Armstrong probably does), I might be inclined to use my new public stock to go an acquisition spree.  We already heard he wanted to do Associated Content and Time Warner shut him down.  Time Warner probably still has that veto power in the context of board ownership, but if it was an all-stock deal, Time Warner would probably be indifferent to it now.
  • If I had a public company and I thought their stock might be flat or go down (like, say, these analysts think), then it would be in my interest to spend my stock like it is going out of style right now.  If every dollar in stock that gets distributed now will be worth $0.90 in the future, that deflation incents you to spend today.  Saving is for people that aren’t earning a negative interest rate.
  • If I had a cost management problem, I would either avoid acquisitions that were not going to break even quickly or I would only do the acquisition if I thought it was a key piece of the puzzle.  Of course, the point is that I could still take some risks and try to bring my costs back in line somewhere else.  I assume, on an absolute basis, that AOL thinks that the current cost cutting efforts will bring costs in-line with revenue.  Or close.  That means if they can tell a story that a deal could be accretive at some point, it is an easy story to do.
  • My experience with Business Development people is that they don’t get to put on their resume: “Avoided doing a bad deal”.  Biz Dev people are great at painting a story of how something will, given a hockey stick, get to profitability quickly.  They get paid to do deals.  If Tim has given them a green light, they will have a story on how they should do some deals.  If the deal goes south or doesn’t hit a number, it was probably a problem in the integration or execution of the business.  Or changing market conditions.  Or something.

Hey, call me jaded, but I was there when Bebo happened.

So if I was Tim, hell yeah, I would do some deals.  Be shocked if they did not go on a wave of trigger pulling all-stock deals.  A lot of these deals will fall apart because companies will want to get paid recognizing the stock is likely to decline and having that built in.  That could make a deal prohibitively expensive.  But it is certainly in AOLs best interest to make the offer.

Here is an idea: Offer Time Warner $34B in AOL stock!  Blam!

One Response to “AOL Begins Acquisition Spree?”

  1. FCC To Become Data-Driven Says Chairman; Facebook’s Zuckerberg On Your Public Profile; Aberdeen Group – Successful Companies Store Customer Behaviors; Taxing Ad Networks In France Says:

    […] Rumors are flying that Mashable will be acquired by AOL – at least, that's what Business Insider says. Mashable has denied the rumors. Read more. But, former AOL-er Brent Halliburton says he'd be shocked if AOL and Tim Armstrong did NOT go on an acquistion of profitable companies using AOL's newly-printed stock. Read more. […]