by Martin Veitch

ITV-Friends Reunited adds to desperate history of crossover mergers

Aug 05, 20093 mins
IT Leadership

It’s easy enough to be wise after the event (as any fule journalist kno) but even when ITV said it was buying Friends Reunited back in 2005, there was a long queue of people forming to vote against the chances of this one having success.

Surely, a TV giant and a social networking site had little in common? But TV was changing fast, ITV was changing fast, the web was rebounding hard and there was lots of talk about convergence so the button was pressed on a deal worth about £175m. That valuation has shrunk to just £25m in the interim period with an agreement to sell to a division of DC Thomson, the Dundee-based publishing empire that spans Beano and Dandy,Commando andJackie. ITV chief Michael Grade blamed the recession and previous management but to sell at that price, you feel they must have been as desparate as ancient, ruthlessly unfunny Dandy star, the stubble-jawed Dan. Even in these dark days, that’s a rate of depreciation that only strikers signed by Newcastle United can usually manage.

The fact is that since the dawn of time company leaders have fancied their chances of building empires that cross business sectors. Most of the empires have been more Ozymandias than Berlusconi. In the technology sector, IBM attempted to combine with telco Rolm in the 1980s, then AT&T tried things the other way around by buying NCR. Both were big fails. At the top of the dotcom froth, AOL bought Time Warner — even bigger fail.

Given the risks, incompatiblities and absence of synergies and opportunities to achieve economies of scale, the sceptic might hazard that the desire to march on new sectors, via merger or otherwise, is more about CEO testosterone than the application of sense, but still they come. Microsoft battles Google in search although it is in many ways a very diffrent business; Google battles Microsoft on the desktop, although it might be better to focus on what it already holds. News Corp gets MySpace and maybe at a good time but is there any real fit?

So Friends Reunited is cast off by ITV, despite being a very fine site that could well prosper under new ownership. The odds remain stacked against such crossover deals but will CEOs in future consult history and keep hold of treasures already amassed? As long as there are vistas of the next valley and new peoples to conquer, I very much doubt it.