A Web of M&A activity

Although the number of catalog mergers and acquisitions during the second quarter remained the same as during the second quarter of 1998, Web-related transactions soared.

Of the 31 mergers and acquisitions during the second quarter of this year, seven – 23% – involved an online marketer, compared to only one last year, when Internet gifts marketer 1-800-Flowers acquired a majority stake in home and gardening cataloger Plow & Hearth.

And as businesses begin streamlining their ‘Net marketing efforts, industry professionals expect M&A activity involving Web marketers to continue. “If a company is going to survive on the Internet, consolidation is the way to go,” says Brian Fawkes, a spokesman for Menlo Park, CA-based ‘Net marketer Onsale, which merged with online computer marketer Egghead.com this past July.

In June, Jersey City, NJ-based online retailer Cybershop.com acquired the Magellan Group, publisher of gifts and personal products catalog Tools for Living, for $14 million. The deal exposes Cybershop.com to a broader audience – about 250 million readers – through Tools for Living’s print ad campaigns in mainstream media such as People magazine and USA Today, according to Cybershop.com chairman/CEO Jeff Tauber: “We’ll use Tools for Living’s print ads to drive traffic to our site.”

Also in June, Round Rock, TX-based computer behemoth Dell Computer Corp. acquired a 4.9% stake in Andover, MA-based NaviSite, which rents software to small and midsize businesses via the Internet. While Dell’s stake is small, Andrew Calimano, an analyst at New York-based investment bank Gruppo, Levey & Co., says that the deal is significant because it is the first sign of $18.2 billion Dell extending beyond manufacturing and marketing computer hardware.

In another Web deal, online pet supplies retailer Petjungle.com in April acquired $48 million Mason Distributors, an Anaheim, CA-based wholesaler of pet supplies. Pasadena, CA-based Petjungle.com, which went live in early summer, is a subsidiary of Idealab, a holding company of Internet businesses. Petjungle.com stands to benefit from the 13-year-old Mason’s customer service, merchandising, and value-pricing expertise.

Familiar players

Though Internet transactions abounded, there were numerous other deals transacted during the second quarter. In May, Henry Schein, the $1.9 billion Melville, NY-based medical and dental supplies marketer, acquired dental equipment firm Procare and medical products supplier Porter Nash Ltd., both based in the United Kingdom. Terms of the deals were not disclosed.

Black Box Corp., the $311 million Lawrence, PA-based computer equipment marketer, strengthened its reputation for customer service and technical assistance by acquiring Atlanta-based Con-Optic (in April) and Columbus, OH-based C-Tel Corp. (in June). Both Con-Optic and C-Tel specialize in computer installation, design, and maintenance services.

And in May, $487 million Appleton, WI-based School Specialty acquired Menlo Park, CA-based, Holsinger, a $10 million distributor of school furniture, and $16 million Audio/Graphics, an Ontario, CA-based distributor of audio/visual equipment. “Both of these acquisitions give us more market penetration in the California marketplace,” says School Specialty president/COO David Vander Zanden.