Ben Hurley Reporter

Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Surge in takeovers of local internet start-ups outperforms sector

Published 22 February 2013 12:15, Updated 25 February 2013 13:09

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Surge in takeovers of local internet start-ups outperforms sector

Digital deal zeal ... APN’s $36 million buy-in to BrandsExclusive, owned by Daniel Jarosch, left, and Rolf Weber, right, was one of the reasons Australia made up a quarter of the Asia-Pacific’s exit deals in 2012. Photo: Fairfax Media

Internet entrepreneurs across the Asia-Pacific region had a lucrative year in 2012, the sector, notching up a 258 per cent increase in the value of acquisitions compared with the previous year.

The combined value of acquisitions of internet companies was $5.99 billion in 2012, compared with $1.67 billion the year before, a report by global venture capital firm Right Click Capital reveals. The average deal value in the Asia-Pacific region also leapt from $70 million to $200 million.

This was a stark contrast to other parts of the world. Across Europe the combined acquisition value fell from $22.12 billion in 2011 to $8.8 billion in 2012, and North America experienced a slight increase only, from $34.85 billion to $37.19 billion.

“We are growing at a disproportionate pace to the rest of the world,” Right Click Capital analyst James Whalley says. “The time we’re entering into is a really good time for entrepreneurs who have developed great businesses and have reached maturity. An exit opportunity is a more likely outcome for a business in the Asia-Pacific.”

Right Click’s research covers global merger and acquisition activity as well as investments, using government and other public information sources to give a broad overview of activity. Only deals above $500,000 are tracked. It covers internet-related companies ranging from software and services to media, marketing, games and also hardware and infrastructure.

The report found the United States remains the leader of innovation, and not just in the outright dollar value of its acquisition deals. Even despite its large population, the US had the second highest deal value per unit of population, ahead of Israel, Hong Kong and Britain. New Zealand came in at number one, and Australia had the 10th highest deal value per unit of population.

However, while the value of exits rose, the combined value of investments in the Asia-Pacific fell from $4.13 billion to $3.14 billion, despite rising in Europe and North America.

About a quarter of the region’s deals were in Australia – where 85 were documented, including Optus’s purchase of Vividwireless for $230 million and APN’s $36 million buy-in to brandsExclusive. And about a quarter of all deals in Australia, both investments and acquisitions, had some form of US interest in them, showing Australia’s start-up ecosystem is increasingly on the radar for overseas investors.

“One of the most astounding statistics was that Australia had the sixth highest deal volume of any nation,” Whalley says. “Looking at the figures for Australia, acquisitions are up, deal volumes are high, but investment is down – for me I think that’s probably evidence of an ecosystem that is refining itself a bit. We’re getting better at predicting who are going to be successful companies, and people are finding it easier to bootstrap their business.”

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