M&A Alert - February 4, 2010
Monster Acquires HotJobs from Yahoo for $225 Million
Transaction Overview
On February 3, 2009, job search website Monster Worldwide, Inc. (MWW) agreed to purchase competitor Hotjobs.com from Yahoo for $225mm in cash. The transaction is expected to close in the third quarter.
Target Description
Hotjobs.com is an online job search site, which provides a range of services to job seekers and employers. The service is free for job seekers and users can access statistics regarding the number of times an employer has viewed their resume as well as a full history of cover letters and resumes sent to employers. It competes with established sites like Careerbuilder.com, SimplyHired, and Monster.com online classified website Craigslist.com, and job-post aggregators such as Indeed. Hotjobs was launched in 1996 as RBL Agency, before re-branding itself as Hotjobs.com in 1997. Yahoo acquired Hotjobs! In 2002 for $436mm in cash and re-branded as Yahoo! Hotjobs, and has since powered Yahoo!’s job posting and search functions. Hotjobs is currently based in Sunnyvale, California.
Buyer Description
Monster.com is a publicly traded job posting board with a total market capitalization of $2.1 billion. Its current incarnation was launched in 1999 as a merger between the Monster Board and Online Career Center. Monster.com is one of the largest employment databases, sustaining over 70 mm resumes and 1mm jobs at any given time.
Transaction Parameters
Monster purchased Hotjobs from Yahoo for $225mm in cash. As part of the deal, Monster will pay to power Yahoo’s job posting services for three years in the U.S. and Canada, giving Monster access to a greater pool of job seekers from which to attract
a greater number of employer-clients, whose fees account for much of Monster’s revenue. Monster’s own financial projections forecast a 20% – 25% increase in their North American segment revenues as a result of the acquisition on an annualized basis. With Monster’s North American revenue at $407mm, this would put Hotjob’s revenue at around $90mm, which comports with industry estimates of Hotjobs revenue being around $80-$100mm. Based on this revenue estimate, the purchase price/revenue multiple is 2.5x. Monster’s common stock traded down by 12% the first day of trading following the announcement although lackluster financial results were announced concurrently. Some analysts have suggested that Monster overpaid.
Strategic Rationale
Monster Worldwide has been struggling recently due to a combination of increased competition and a dismal job market which has reduced corporate hiring. Monster’s just released financial results betrayed the challenges with December 2009 quarter revenues down by 27% from the similar period last year. Monster management positioned the transaction as a consolidation providing a broader base of employer customers, a deeper pool of job seekers and improved operating expense efficiency. Monster has seen a significant portion of its market share lost recently to single-issue, metasearch engines such as Indeed.com, which sends search requests to several search engines for job listings, and then aggregates that data into one single list. According to comScore.com, Indeed.com received 8.4mm visitors in December 2009, compared with 5.4mm for Hotjobs and 6.1mm for Monster. By aggregating Monster and Hotjobs’ databases and technical expertise, and emphasizing their ability to intelligently match the right employer with the right job seeker, this combination should help to combat the challenge represented by the metasearch model.
Architect Partners’ Observations
There is undoubtedly a large overlap of both employers and job seekers between both Monster and HotJobs which will impact the contribution that HotJobs actually brings on the revenue side. Based on the rather sparse level of disclosure provided by Monster upon the acquisition announcement, it appears that the merged company financial model is still an open question.