Avoid Over-Negotiating (See Tradedoubler)

Jorge Espinel / July 16, 2008

In January 2007, AOL made a tender offer for Tradedoubler shares at 215 SEK (Sweedish Krona). The total value was $900M. The offer was supported by the board of directors and counted with support from several large shareholders. However, the majority of the shareholder base decided that the offer undervalued the company significantly. AOL pulled its offer a couple of months later. AOL went on to buy Buy.at an affiliate marketing company in the UK.

Today, 18months later, Tradedoubler is trading at 68+ SEK (Sweedish Krona). This is a major drop in value in a very short period of time.

One of the challenges with digital media companies is that they face hyper-competition and rapidly changing market dynamics. This means that companies can drop in value as fast as they rise. Revenues can come and go pretty quickly for a company. Revenue streams do not last forever for digital media companies.

Shareholders and Corporate leaders need to be aware of this “hit-like” dynamic for digital media companies and be more thoughtful when evaluating potential M&A opportunities.