Skip to main content

Hmm...everything I'm interested in is relatively insignificant..

As someone who will get a Finance concentration from the Chicago GSB, I've done my fair share of assignments/projects involving valuing companies. (Note: I'm not claiming expertise, merely experience:)) A number of factors make this complicated (hence the need to actually learn it, and the excuse to still struggle with it) but essentially the value of a company is the expected value of its future cash flows.

Acquisitions by companies are a simple way to understand not just what a company is valued at, but also a sense of how much revenue it might generate in the future, in a sense how "big" a part of the economy it currently is.

I tend to be interested in, and get excited by, tech and media stuff, and tend to focus on reading about these sectors. I've always known at the back of my head that I'm ignoring other sectors that may in fact be much larger, and today was a stark reminder of that.

So I've been thinking for the last couple of days: "Google acquired DoubleClick for $3.1 billion. Wow! That has to be huge"
Well sure....for a tech deal it is. But looking at the deals being talked about just today, on one randomly picked day, in the Journal, that completely dwarf the size of this deal, I realize just how relatively small what I think of as the tech sector, still is when compared to the entire economy.
Just today, the deals being talked about:
  • KKR-led consortium is offering $21.2 billion for Alliance Boots (never heard of em until today)
  • Interpool (??) is buying Fortress Investment funds (ok..) for $2.4 billion.
  • Japan Tobacco bought Gallaher Group (which makes the Benson & Hedges cigarettes) for wait for it....$15 billion (apparently not everyone agrees that smoking is hazardous yet)


shmoo said…
I don't get this Google acquisiton. Google must think DoubleClick will make them more than $3.1 billion, otherwise they wouldn't buy. DoubleClick's owners must think they would've made less than $3.1 billion, otherwise they wouldn't sell. One would think DoubleClick would know themselves better than Google does. Can Google run DoubleClick better than it could've been run alone?
Satyajeet said…
This is where the complications come in
- DoubleClick was owned by a PE firm, which needed to flip it.
- There's always the "revenue synergy" argument. The Big G is able to get more revenue synergies than anyone else.
- There's additional value to Google in keeping DoubleClick out of the hands of Msft.
shmoo said…
Okay, so:

1) That semi-explains why they were willing to be sold.

2) Um... okay, I guess...

3) That assumes that Microsoft has that "revenue synergy" also, or else DoubleClick owned by Microsoft wouldn't be any more of a threat than DoubleClick alone.
Satyajeet said…
Its reasonable that DoubleClick+Msft will be a more competition, than the two separately, especially since MS is having trouble kicking off their a business, and there are some scale advantages in the business. No?

Popular posts from this blog

Measure f-ing everything, and assume f-ing nothing!! - Or how mentoring ruined lives :-(

I've been really enjoying the Freakonomics podcast of late. This episode and the lesson we should take a away from it, was a stark reminder of one of the most important things we should be doing - but often don't - in building products or making any decisions: measuring the impact of absolutely everything we do, including the things that seem obviously good.

I recommend listening to the podcast if you have the time, but here's the summary. Stephen Dubner describes the Cambridge Sommerville Youth Study. The impact of social intervention programs in general is hard to measure and so they seldom are. This was the first attempt at measuring the impact over a long period of time.

It's a great story and there are a few good take-aways, but here's the main one: troubled or at-risk youth that received mentoring (good mentoring!) had worse life outcomes across every dimension than the kids that were left alone. Despite the recipients saying that the mentoring was incredibl…

Whimsy when I changed my profile picture...

I changed by profile picture at work.

Later in the day, two people on my team had changed their profile pictures to these.. :-)

It made my day!

I changed my profile pic again today. Let's see how fast anyone catches on this time. :-)

Yup - humans still lack humanity

Every once in a while, I'm reminded that humans can be completely lacking in humanity.

My wife had the following experience yesterday on her ride back home. She got on the train and found a seat. The train was unusually crowded and it looked a lot of people had to stand for a long ride. An elderly Asian gentleman carrying a few things in both hands, was looking for spot, started to complain smilingly about the train being so full and stood in the aisle at the back of the carriage some seats away from her.

She expected someone closer to gentleman in the aisle (lots of younger people on the train) to give him their seat.

No one did.

The train started, and it was clear the man was having a lot of trouble standing up. Then at the next stop there was actually an announcement saying the train was full so please give up your seats to people who needed them.

Still nobody moved.

My wife got up walked to the end of the train and asked the gentleman to go over to her seat. She still couldn&#…