Montgomery & Co. on M&A environment

Banker for $125 mln DailyCandy deal talks about the selling landscape

Jamie Montgomery is the founder and CEO of Montgomery & Co., which recently led the bidding process for DailyCandy, the newsletter company that sold for $125 million. The LA-based investment bank is also noted for being the bankers on the $700 million Club Penguin sale to Disney. 

I caught up with Jamie at the AlwaysOn Stanford Summit this month to discuss exit strategies. Not surprisingly, Jamie said the IPO market is on hold for now. Mergers and acquisitions aren't happening like last year, he said, adding that Montgomery has about 5% to 7% of the media M&A market share. The problem is that there are fewer buyers at the table and "expectations of the sellers are high," he said. "There were 550 venture-backed M&A transcations last year... It's down 30% from that," he said. 

For companies seeking to sell, financial buyers, such as General Atlantic or TPG, may be willing to pay up more than strategic buyers, said Jamie.

As for the IPO market environment in 2009, Jamie doesn't believe companies that have received sizable valuations, such as Slide ($500 mln), Ning ($500 mln), and LinkedIn ($1 bln), will be able to go public next year. It's not that the companies don't have traction, he suggested. The challenge is that they're not showing the profitability levels that public market investors want.

"It's a little early for them, [particularly] in the current environment," he said "You need to see double-digit profitability."

What do you do if there is no exit for you in the public markets? I asked.

Jamie said that companies can do later-stage financing. Besides facilitating the banking deal, Montgomery & Co. also makes its own investments, at times providing liquidity events for early-management teams.

Jamie and I also discussed Sarbanes-Oxley and other regulations that are contributing factors to keeping the IPO market depressed.