Searching for value drivers in InterActiveCorp's M&A strategy
July 1, 2003
James Brelsford, a technology transactions partner in Jones Day's Menlo Park Office, was quoted in the following article published by
Mergers & Acquisitions: The Dealmakers Journal:
Onetime movie mogul Barry Diller continued to add to the Internet hodgepodge of InterActiveCorp (formerly USA Interactive), picking up LendingTree Inc., an online loan marketplace, in May for $734 million in stock. A month earlier, the company acquired all of the shares of Hotels.com it did not already own in a $1.1 billion stock deal, and bought the remaining stake it did not already own in online travel company Expedia Inc. for $3.3 billion. Already in the company's portfolio were such properties as Ticketmaster, Match.com, Citysearch, and Home Shopping Network, a broadcast asset that Diller had owned.
Last year he sold most of his television and film assets to Vivendi Universal Entertainment and began investing heavily in Internet operations - joining them under the umbrella of USA Interactive. His company has been assembling a powerhouse of well-known online assets that specialize in selling and searching functions. Last month the company changed its name to InterActiveCorp to emphasize its role as an interactive commerce pure play.
Through an aggressive growth-via-acquisition game plan, the company is developing a multi-brand online strategy that targets some of the Internet's most successful areas - information and services, e-commerce, and travel bookings. While some industry followers predict that InterActiveCorp's strategy will be a winner, others question whether aggregating disparate brands under one corporate roof offers any real synergy opportunities or provides the acquired businesses any advantage over being run by individual owners.
Diller is generally viewed as a good dealmaker who is "spicing up" the Internet with his stratagem. Yet, according to Jonathan Hurd, Vice President in the media and entertainment practice at ADVENTIS, a management and strategy consultancy focused on information industries, branding is a key issue for the company. "It's not clear that InterActiveCorp is a brand that customers care about."
Hurd and other media pros say that Diller most likely will continue to retain the well-known brand names that he acquires, following a multi-brand strategy like that of Procter & Gamble Co. Single-brand companies like Sony Corp. and 3M Co., which brand their products under their corporate name, can achieve greater efficiencies, though they lose some effectiveness in being able to target specific audiences, says Aaron Keller, Managing Principal of Capsule, a brand development firm located in Minneapolis. "What InterActiveCorp lacks in inefficiency it gains in its ability to target certain audiences with specific brands and to acquire Internet sites that cater to particular consumers," he notes.
Agreeing with Keller, Jim Brelsford, a partner at Jones Day, notes that InterActiveCorp's tactic of picking up "vertical slices of e-commerce engines that are not just e-commerce-oriented but transaction-oriented does allow for diversification across numerous product lines. On the down side, if InterActiveCorp "maintains the unitary brands, their unitary web sites, and unitary domain names, it's a little bit hard to cause users to move among those properties, so there is a bit of a lost opportunity there," adds Brelsford, a former senior executive of AT&T Corp. subsidiary At Home Corp.
"To give InterActiveCorp some credit I believe there is synergy that could be exploited in sharing customer information among the businesses, but beyond that there are no brand synergies," says Hurd. Keller, on the other hand, is not convinced that sharing customer information among the businesses would add "a great amount of value."
The value of the InterActiveCorp's businesses might lie in their content, says Keller. "In the Internet environment, content is a key issue. The strategy might be that content is king," so companies that will be successful in the future will be those that are able to create better content, and InterActiveCorp believes it can do it and deliver it within all of its brands," notes Keller.