We spoke with a source familiar with the details of the AOL-Tacoda deal:
Reuters estimate of a $275 million purchase price is correct. Tacoda’s revenue will probably be in the neighbourhood of $25 million to $50 million this year. On a revenue-multiple basis, therefore, the price was likely between 6x-11x, probably at the higher end of that range.
The acquisition came about after Tacoda pursued a round of additional financing. After the valuation for the financing was set, the company spoke with potential “strategic” partners (read: AOL, Google, Yahoo, etc.) about co-investing. These discussions quickly led to offers to purchase the company outright.
In a short, informal process, Tacoda solicited offers from several potential buyers. AOL’s bid was initially the highest. One or two other buyers might ultimately have topped this bid, but did not move quickly enough. Tacoda did not use an investment banker, and the process was not a full-blown auction or bake-off. Tacoda was impressed with AOL in part because AOL immediately trotted out the big guns (presumably, CEO Randy Falco, president Ron Grant, and Time Warner management in New York).
From AOL’s perspective, the acquisition is a good fit for several reasons:
- Tacoda’s relationships are at the high-end of the web publishing food chain. AOL’s relationships, primarily through Advertising.com, are mostly at the low end. Thus, Tacoda will complement AOL’s existing business.
- Tacoda’s management team is reportedly very strong, especially for a company of this size. Tacoda’s team will help strengthen AOL’s.
We were initially surprised that, of all possible suitors, Tacoda would choose AOL. Based on the discussion reported here, this choice makes more sense. We are still curious as to why Google, Yahoo, and/or Microsoft weren’t more aggressive in the bidding. Given AOL’s obvious commitment to the deal, however, combined with its having made the highest offer in the initial round, Tacoda’s choice isn’t surprising.
UPDATE: Another source suggests that, despite Tacoda’s commitment to privacy, other suitors might have shied away from the company in light of the privacy concerns dogging Google, Doubleclick, etc. This makes sense.