Greenfield likely to be split by new owner to unlock strategic value; various buyers likely, analysts and executives say19 June 2008

Greenfield Online's internet surveys and comparison shopping segments will probably be split following the announced USD 426m acquisition by private equity firm Quadrangle, analysts and executives said.
The deal, announced Monday, is subject to a 50-day "go-shop" period in which the Wilton, Connecticut-listed company will entertain additional bids. However, further bids may be unlikely given the firm sought a buyer for the better part of a year, one industry banker recently told this news service.
Greenfield declined to comment on the situation.
An industry analyst said there is an outside chance ValueClick of Westlake Village, California could make a bid for the business. At 8x forward EBITDA, Greenfield would be comparable in value to ValueClick’s MeziMedia buy last year. ValueClick, which has about USD 200m in cash, could build Greenfield’s internet survey panels using its affiliate marketing business and roll the comparison shopping site into its own. “They could get tons of synergies from it,” he said.
But when the analyst suggested this to ValueClick several years ago, executives at the company said it would further confuse their business, which is comprised of several online advertising segments.
Greenfield's internet survey business has been weakening, with revenues dropping from USD 104.8m in 2007 to a projected USD 104.3m in 2008.
"Marketing budgets are coming down especially from the consumer product companies and that's what their core customer is," JMP Securities analyst Sameet Sinha said. Indeed, he said the business may be feeling additional pressure as a result of a planned merger between two large European market research companies: London-based Taylor Nelson Sofres (TNS) and Nuernberg, Germany-based GfK.
TNS and GfK account for roughly 22% of Greenfield's survey revenues said Sinha, and he said a combined entity could further pressure price breaks for its survey services.
An industry executive added that the survey business is facing commoditization pressure and a backlash against the rise of "professional panelists" who take on-line surveys full-time. Saying companies in the space may fetch 1x revenues, he named a number of market research firms as potential bidders for the survey business.
These included TNS, GfK, London-based Synovate, London-based WPP Group or Paris-based Ipsos. In addition, the industry source said he believed Harris Interactive of Rochester, New York could be interested in acquiring Greenfield’s panelists, but not its survey technology.
In the event Greenfield is split into two businesses by Quadrangle after the go-shop period, Providence Equity Partners may be interested in making a bid for its internet survey business, said the analyst. It could combine the business with Survey Sampling International (SSI), in which it has a majority stake, however it has probably already evaluated the move, he noted.
Meanwhile, Greenfield's comparison shopping site Caio.com has proven to be a strong presence in Europe.
The site has overtaken Yahoo's Kelkoo European comparison shopping site, said a second industry banker. Indeed, JMP's Sinha noted that the fast-growing business has gone from first quarter 2006 revenues of USD 3.4m to first quarter 2008 revenues of USD 11m.
The market for M&A among these businesses has been strong lately, with Scripps known to be selling Shopzilla and Experian known to be selling PriceGrabber.com. With Caio.com in their portfolio, both JMP's Sinha and Zango EVP of corporate development York Baur – which includes comparison shopping in its businesses – say Quadrangle could look at buying either the Scripps or Experian property.
Yet, opinions differ on the value of a comparison shopping roll-up.
Without any single strong brand names amongst the comparison shopping sites, a second industry banker thought the ploy unlikely, suggesting Caio.com might be a better candidate for a European IPO. The banker, who is familiar with the strategies of various comparison shopping sites, said the space is unlikely to attract significant strategic interest.
However, a second executive in the space suggested Caio.com could be targeted by San Jose, California-based eBay in a bid to strengthen the European presence of its Shopping.com site. The executive also suggested that Japanese comparison shopper Kakaku or Seattle-based Amazon could look at the property. He noted that many comparison shopping businesses need to evolve into more effective search, retrieval and comparison sites before becoming a key play in the strategies of larger online and search businesses.
"Comparison shopping sites exist as a stepping stone to later evolution of a broader product search service," he said. The executive said comparison shopping site economics are uncertain, noting that consumer search engines can undercut performance by downgrading the prominence of their display in search results.
With Microsoft desperate to gain market share in search from rival Google, Baur suggested Quadrangle's ownership of Caio.com could come at just the right moment. "If I were in MSN's shoes, I'd integrate comparison shopping technology into the MSN Live search directly," he said of a strategy to make the site more attractive.
Buying a comparison shopper such as Caio.com or one of the other properties now up for sale could help with that, he said. Baur suggested these sites could consolidate over the next 24 months as a way to control a segment of search traditional giants do not yet own. Ownership of Caio.com by Quadrangle could position the private equity firm to do that, he said.
Sinha, the JMP analyst, noted that though social networks could use comparison shopping technology to earn transaction fees from member purchases, only a few could make such a buy. Facebook or MySpace were two he named as having that ability.

by James Erik Abels and Louise Bleakley

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