Fullscreen and others would be wise to remember, headlines of rumored acquisitions do not an exit make
A funny thing happens when companies think their window to exit may be closing. All too often there suddenly appears a host of anonymous sources eager to leak unconfirmed acquisition rumors, typically at nosebleed valuations. The higher the valuation and the more flimsy the rumored deal, the more confident you can be that the sources stand to benefit from such a sale, and from stoking FOMO among other prospective acquirers.
So has been the case with Fullscreen in the months after MCN market leader Maker Studios sold to Disney for $900 million, and after AwesomenessTV sold to Dreamworks Animation in a deal valued at up to $117 million.
Fullscreen's founders and board have got to be thinking now is their time. And thus, it's not surprising that the over last six weeks Fullscreen been rumored to be in advanced discussions with three prospective suitors: first was Time Warner Cable that was sniffing, but has since reportedly passed on the deal; then Relativity Media, who previously tried and failed to steal Maker from Disney, allegedly offered to pay $350 million plus an earn out that would reach $1 billion; and now, most recently, it's Yahoo, the company that many expect to compete with YouTube for user-generated video supremacy, that is said to have offered $250 million, while existing investor, Chernin Group may also be "interested."
That's a lot of smoke, but still no fire.
I have no doubt that Fullscreen is talking to all these firms in some capacity. But such talks are so commonplace as to be barely newsworthy, and can quickly morph from partnership discussions to investment talks to acquisition discussion, and back again, without ever moving beyond casual conversation between executives.
What that means with regard to whether the companies are truly close to making a deal is anybody's guess. But we can be confident, given how strongly it's in Fullscreen's best interest for the market to think that it's a hot commodity, that these rumors most likely are coming from those with the most to gain.
It's not that Fullscreen's not a valuable or even attractive acquisition target. It most certainly is, at some price to somebody. The issue is that when the markets are frothy, as they are now after the Maker deal and with fellow MCNs like Tastemade and MiTu raising large strategic rounds this month, remaining standalones like Fullscreen begin pressing the issue, hoping to strike while the iron is hot.
It's not as if the company has built a sustainable business model or given any indication that its capable of remaining independent on a going forward basis without raising more money or finding a rich sugar daddy acquirer. And thus with legacy studios intent on entering the digital video space, seemingly without too much concern for the cost, now would be the time for Fullscreen to generate as much interest possible. Hence the recent the recent rash of rumors
The company surely isn't unique in this strategy. It's fairly commonplace in the venture world (and particularly in Hollywood) to use the press to drive an M&A strategy. And thus, you can’t blame the company or its loose lipped friends for taking a shot. But these acquirers aren’t fools and surely know what game Fullscreen is playing. Ultimately, it’s unlikely to have much impact, other than to give rank and file employees something to be excited about. If someone wants to acquire Fullscreen, they will, at terms that the deem reasonable.
Headlines in Variety and The Wrap (let alone the UK’s Sky News, who “broke” the rumored Yahoo deal) don’t lead to multi-hundred million dollar acquisitions. You can only “act as if” for so long. Eventually, you either have the goods, or you don’t. We’ll see soon enough what Fullscreen is working with. Until then, don’t believe everything you read.
[Image via FineArtAmerica]