Facebook’s (NASDAQ: FB) acquisition of WhatsApp for $16 billion is either pure genius or absolute insanity. Whatever the future holds for this deal, the stunning price paid for a private technology company – about double the price Google had recently offered for WhatsApp – kicks off dot-com re-dux.
Facebook is betting 10% of its (one could argue) already-inflated market cap on an unproven company. Well, unproven from a profitability standpoint.
What WhatsApp has proven is an ability to capture eyeballs.
Oh no. Remember the term “eyeballs” from the heady days of the first dot-com bubble, when all that mattered was visitors to your website?
Never mind profitability. The mantra is “spend whatever it takes” to get the eyeballs . . . and in the process destroy any hope of making a profit – ever.
Just like the first dot-com bubble, this one too shall collapse. Along the way, though, there are some likely beneficiaries of the new technology bubble emerging. Of course, I am referring to Wall Street.
The Facebook – WhatsApp merger will generate close to $100 million in fees for advisers representing both companies.
The day before the deal was announced, Ernst & Young issued a report that said 2014 is going to be a strong year for M&A in technology, at worst. At best, it could be a blockbuster year.
The arms race appears to be on. If Facebook’s move is any indication, it looks more likely to be a blockbuster. Whether these deals pan out or not, the advisers are going to be laughing all the way to the bank.
Here are three companies that will benefit from the new tech mania: