According to the two reports by Webmergers.com, the 40 shutdowns that took place in December accounted for at least $1.5 billion in investments. The reports only studied what Webmergers.com describes as “substantial” internet companies.
E-commerce players accounted for 109 shutdowns, or just over half of the total. Content properties made up another 30% of the total while infrastructure and on-line services companies accounted for the remainder. Between 12,000 and 15,000 employees lost their jobs as a result of the company closures, according to Webmergers.com estimates.
Consolidation grew rapidly last year. M&A spending reached $87 billion in 2000, 85% above 1999 levels. The number of deals doubled from 1999 to 910 in 2000 although total M&A spending eroded steadily as the year wore on; the first quarter accounted for 60% of the spending in the year while the fourth quarter accounted for only 6%. Against that decline in total spending, the number of deals remained strong, slipping only 15% from a high of 244 in the second quarter to a low of 211 in the fourth.
The M&A report observes:
“The dramatic quarter-by-quarter decline in total spending was due in large part to the severe erosion in valuations of Internet companies that continued throughout the year. For example, About.com, which was acquired by Primedia in October for $690 million, had sported a market valuation of more than $2 billion at its trading high in mid-March. Declining valuations were a two-edged sword this year because they also put a damper on acquisitions by large players such as WebMD, which had used their richly valued stock to dominate M&A activity in 1999 and in Q1 of 2000.
“While last year also saw the death of more than 175 internet destinations, about five times as many dot.coms made it to the altar as they did to the mortuary in the 12-month period.”
The M&A report omits the $157 billion AOL/Time Warner deal, the size of which would obscure meaningful trends.