Friday, December 21, 2007

Kayak buys Sidestep for $200mm



Hot of the blogsphere care of TechCrunch and days after I pondered if an OTA would buy a meta-search provider we find that Kayak has raised $196mm, from pretty much everyone on Sand Hill Road and used the money to buy Sidestep for around $180mm (plus $20mm in cash reservers at Sidestep equals $200mm). Arrington has the full story here.

Sidestep will lose 55 staff (out of 75) including CEO Rob Solomon (after 60 day transition.

What are the possibilities here:
  • Do they keep two brands?
  • Do they merge the content businesses that each of them built or bought to do SEO?
The biggest question of course - is this a sign of strength in the market with one and two coming together to dominate or a sign of weakness that they need to get together to survive? Deal of the year at the last moment in the year.

UPDATE - Adam Healey over at VibeAgent has crunched some numbers on the deal putting the combined entity (or new Kayak) at a valuation of $450 million or a P/E of 35 (assuming 15% margin on TechCrunch's reporting of combined revenues of $85 million).

UPDATE 2 - Interview here with Kayak's VP Communications Kellie Pelletier about the deal,

3 comments:

gavin said...

Wow! I am blown away with a deal of US$200 million.

Kayak and Sidestep combined now own the US travel search market and both companies have a good start in Europe........it does seem strange that Kayak....... who has yet to launch into Asia would spend so much money buying out a competitor in the same US Market ...I wonder what acquisitions are on the cards for local Asian companies like Bezurk and Sprice and Qunar.

I would have thought Kayak would have been well placed to make a play for a company like Bezurk who seems to have gotten a jump in Asia. Asia must be a priority for Kayak for them to reach global domination.

I have used Bezurk, Sidestep and Kayak successfully to research some recent trips and I must say they were pretty similar ---- so the guys at Bezurk must be rubbing their fingers for a future pay day like Sidestep's

Elliott Ng said...

Hey Tim. You were the first T-list blog to sniff out what we were doing at Kango! Hope to get your feedback on what we are doing.

We blogged about this merger. We think its a sign of strength and opportunity. The key marker is the 10% (only) overlap in traffic. That shows that the comparison shopping segment has upside growth potential in my mind. We think there are several other segments that will also grow. One of them is the early planning and discovery phase. We are taking semantic search approach but there are many ways to skin this cat. There are other segments as well. 2008 will show a more complex competitive/coopetive environment, with a lower degree of dominance by OTAs thanks to substitutes like Kayak. Love to get your feedback on our ideas on this.

Yen said...

Deal of the year Tim? Likely, but how about setting up the travel IPO of the year in 08? What range might Kayak’s IPO be at given the operating metrics reported? I have talked to a VC involved who says Kayak will do a “billion” dollar IPO in 2008. Well, that might be necessary for the VCs who invested in the last round assuming Kayak raised ~$150M in equity (and the remaining ~$45M in debt) for 25% of Kayak. Let’s do some back of the envelope analysis. The dominant online travel agency, Expedia (owner of Hotels.com, TripAdvisor, HotWire…) trades at 3X revenue. Assuming 40% growth on their current revenue of $85M and a multiple of 6 instead of 3 because of a faster growth/higher margin story, perhaps an IPO range of $700-800M?

What's a few hundred million dollars between friends!