VCJ Cover Story: Internet M&A on the Rise

As the Q2 Exit Poll numbers released today show, the Internet is driving the exit activity.

This is no surprise to Google and other large acquirers. The Internet titan, which racked up 48 acquisitions in 2010, is on a similar pace this year and is even rumored to be looking at bringing Hulu into the mix. It’s already scooped up BeatThatQuote, ITA Software, SayNow and Zynamics this year.

Its strategy isn’t hard to decipher. Google, like other acquirers, hopes to reach deep into the startup ecosystem for new products, engineers and emerging technologies. And it isn’t the only tech Goliath working from that same playbook.

As today’s issue of Venture Capital Journal reports, corporate acquirers scooped up 109 venture-backed startups during the first quarter, a pace similar to the record setting deal making of 2010, when 431 companies were bought, according to the National Venture Capital Association and Thomson Reuters, publisher of VCJ and peHUB.

The trend repeated itself in Q2, as half of the quarter’s IPOs were Internet-related. Of the 79 venture-backed M&A deals in Q2, more than half were from the Internet and Computer Software and Services sectors.

As VCJ Senior Editor Mark Boslet points out, this is likely to keep some of the hottest Internet markets sizzling well into the future as demand continues for VC-backed startups addressing social media, social gaming, consumer ecommerce, mobile advertising, security, cloud infrastructure, online analytics, and apps for smart phones and the iPad.

Investors, such as Robert Ackerman, managing director of Allegis Capital, are seeing the trend first hand. In the past six months, he says, “I have had M&A feelers on half of the portfolio.”

By the time the year is over, “the M&A activity will be twice what it was last year,” as long as the economy doesn’t weaken too significantly, Ackerman says.

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And if you want to talk more about M&A activity or VC-related issues, send an email to Alastair Goldfisher at