Mobile M&A Is Hot, Likely Because Prices Are So Low

Mobile startups are getting snapped up left and right, but they aren’t selling for a whole lot. It’s a point that gets underscored in a newly released third-quarter M&A report published by the New York-based investment bank Jordan, Edmiston Group (JEGI). According to JEGI, “mobile media and tech” deals soared 148% over the last 12 months, but they’re selling for $33 million on average, compared with $100 million for other media and information sectors.

“We’re definitely having [mobile] companies, where we’ve invested smaller amounts of capital, be approached by dominant players in mobile computing,” said John Albright, managing partner of JLA Ventures and co-managing partner of Blackberry Partners Fund, in a recent conversation.

“Corporate buyers want to stay ahead and avoid having to buy an AdMob [the mobile ad network purchased last year by Google for $750 million] by identifying companies and talent earlier,” said Albright. “They want to buy product leaders and not market leaders.”

JEGI reported 62 “mobile and media” transactions through the first three quarters of this year and valued them at a total of $1.2 billion, though many more deals were for undisclosed (and presumably smaller) amounts.

Among other acquisitions, including TechCrunch, AOL scooped up a Santa Cruz, Calif.-based location-based mobile application maker Rally Up in August for an undisclosed amount. Apple, which bought AdMob competitor Quattro Wireless for $275 million back in January, last month acquired the Sweden-based facial recognition startup Polar Rose, whose technology is expected to appear in iPhones. The transaction price also wasn’t disclosed, though reports pegged the purchase price at between $22 million and $30 million. Meanwhile, the media giant Meredith Corp. acquired mobile marketing firm Hyperfactory in July. Financial terms were not disclosed.

Social networking giants Zynga and Facebook have also developed a big appetite for young mobile computing startups, of course. “They ’re realizing that people are communicating on an immediate basis and don’t want to wait until they get home to turn on their laptop or desktop,” says Albright.

In July, for example, Facebook acquired New York-based social check-in service Hot Potato for an undisclosed amount. (AllThingsD pegged the price at between $10 million and $15 million.) Hot Potato was founded last year. In August, Zynga acquired Japanese social game developer Unoh for an undisclosed amount. According to a joint press release issued at the time, Unoh becomes “part of the foundation of Zynga Japan’s mobile product efforts.”

“We haven’t crossed the line where handheld Internet users top [desktop and laptop Internet] users, but we’re getting there,” said Albright, who estimates the shift is coming within two to three years.

According to JEGI’s report, the number and value of all M&A transactions in the first three quarters of this year have increased by 42% and 95%, respectively, over 2009 levels. The surge has been led overwhelmingly by corporate buyers, which drove 86% of total transactions announced, according to JEGI.

You can read the full JEGI report here.