Are you kidding?
Did you guys see the front page. That's absurd.
"Active.com to be bought for $1 billion despite fact it's never produced a profit and messed up both Chicago and Marine Corps Marathon registrations"
Are you kidding?
Did you guys see the front page. That's absurd.
"Active.com to be bought for $1 billion despite fact it's never produced a profit and messed up both Chicago and Marine Corps Marathon registrations"
The question i have is how much did whoever started that crap site coolrunning get? Cool running merged with active several years ago. If cool running even got 1% then it's worth 10 million.
By that logic letsrun would be worth 10 million.
http://runmomrun.blogspot.com/2008/01/coolrunning-and-activecom.html
Active probably has a buttload of revenue with campsite reservations and race entry fees. It is almost a monopoly on those two services.
A private equity firm that specializes in software looks at the software Active uses and probably creams in their pants seeing how crappy the site is now and how easily and how cheaply it could be improved.
They can easily improve the experience and already have a ton of customers built in that cannot really leave and generate a lot of revenue.
Still a billion seems like a lot of money for Active.
I just hope they improve the experience for the end user. It could be so much better.
We all know Active for races but that only represents about 10% of their business. Piggy backing off the last post, they do a lot of business in campgrounds, as well as hunting and fishing licenses, work with a ton of parks and rec depts, business events (e.g. Oracle OpenWorld, Cisco Live), and mega-churches.
It's too soon to say if they're overpaying. Look at Amazon, for years they turned a loss. The key with Active is that since they have a piece of so many different markets, that means they have customer data in all of those markets. So if they can do a better job of organizing that data, it would be worth a lot of money...apparently at least a billion dollars.
It's risk-reward. Just because letsrun turns a profit doesn't mean it's potential is tens of millions of profit. Active is turning a loss but their potential based on market share is massive.
page down wrote:
It is almost a monopoly...
A private equity firm that specializes in software looks at the software Active uses and probably creams in their pants seeing how crappy the site is now and how easily and how cheaply it could be improved.
I just hope they improve the experience for the end user.
Putting these three statements together tells me that due to monopoly status, there is no incentive to improve the experience for the end user. Where else will the end user go, anyway?
What will happen is the fees will be raised even more. Unnecessary staff will be laid off. How else is the private equity group going to squeeze out their profit?
They're not looking solely at cash flows from revenue, if the company has little to no debt they can take on large amounts of debt to 'upgrade' and 'build the business out' but mostly to issue large dividends to the new owners. Someone mentioned an infrastructure buildout which if done correctly would lower annual expense going forward which means more free cash flow. The new owners my pursue legal assets like trademarks and patents which would make the company more valuable in whole or in part. If the business gains profitability they will pursue tax assets most likely by structuring foreign entities to reduce tax costs. Finally, exit with a sale greater than $1B in whole or in part.
Will the business still have value to the consumer? Sometimes yes, sometimes no. PE focuses on the finance side not the marketing side, the value to the end consumer is almost never the objective of a PE buyout.
There are small regional competitors to Active, at least in the competitive event side of the market.
Active has a very desirable business. They have an established revenue stream from registrants across a lot of different areas. They have a goldmine of a targeted database. And, right now they have a near monopoly in the core of what they do, which is extendable in many ways.
Worth a billion? Who knows, but they are certainly a desirable business to own.
its all about potential, and Active has alot.
a couple very smart people is all it takes to turn that potential into alot of money
Because of the enormous commercial possibilities should they succeed.
investing 101. Stock prices have little to do with todays profits. They are all about tomorrows profits. I am guessing the expectation is that all future revenue growth is pretty much profit (pretty standard in software where after you pay for R&D your profit margins are up in the 90% range) and that eventually they will be able to lower the amount of money spent to acquire customers (i.e. it costs money to get a campsite to list with you but after they do it, it doesn't cost as much to retain them). Seems like a horrible market to be in but who knows. Maybe in 10 years these guys will be like ticketmaster.
blue collar wrote:
Are you kidding?
Did you guys see the front page. That's absurd.
"Active.com to be bought for $1 billion despite fact it's never produced a profit and messed up both Chicago and Marine Corps Marathon registrations"
Just red some newswire story. Active.com brings in over $400 million a year in revenue.
Anyone know how they blow through $400 million a year on the expense side? My initial thought is it would scale very well. Apparently not how they are running it now.
wejo wrote:
Just red some newswire story. Active.com brings in over $400 million a year in revenue.
Anyone know how they blow through $400 million a year on the expense side? My initial thought is it would scale very well. Apparently not how they are running it now.
Each employee is getting paid $10 million per year
It's manipulated with junk bonds - you can't win!
Valuation is based not on a single years revenue. The equation for value in their market, I don't know. Similar to Rick's Caberet, they are publicly held with really no benchmark or precedent in their sector. But like Rick's they probably hire former attractive female distance runners. My guess is the customer data they have accumulated is what is really driving the value. PE is always looking for ways that simple lean practices can generate quick profits. I think this may be an easy target, but I haven't seen the financials.