DC Consulting Firm Releases Second Annual Internet Valuation Study

Bond & Pecaro's "CyberValuation 2000" Profiles 912 Internet Transactions

WASHINGTON, DC, July 20, 2000—Bond & Pecaro, a Washington, D.C.-based consulting firm, has completed their second annual in-depth study on the valuation of Internet companies. Buyers, investors, and operators have scrambled to keep ahead of the changing valuations of Internet companies. Which sectors are the dominant companies targeting? Are the valuations justified? CyberValuation 2000 analyzes 912 Internet company transactions which were announced or closed within the last year, highlighting trends and offering a toolkit of practical measures of valuation for shareholders, CFO's, lenders, investors, and industry analysts. While the value of Internet companies appears to most of us to be guided only by mass hubris, Bond & Pecaro illustrates that there is a roadmap of trends and benchmarks to follow.

"The issue of valuation has emerged to the forefront of merger and acquisition activity in the Internet sector," says Tim Pecaro, principal at Bond & Pecaro. "With the downturn in the financial markets during the spring, buyers and investors are looking beyond the strategic value of acquisitions and must carefully analyze what constitutes fair market value."

The company's research examines four industry segments: Internet Service Providers (ISPs), portals, Internet retail and business-to-business ventures. The key benchmarks include valuation multiples for revenue, subscribers, and unique monthly visitors. These "multiples" are a ratio of the value commanded in the marketplace divided by actual performance indicators at the time of the transaction. The report also profiles transaction details such as purchase price, offering proceeds, market capitalization, revenues, and subscribers or unique users of the Internet entity where available.

Bond & Pecaro principal Jeff Anderson emphasizes, "The value of companies in emerging industries is largely driven by the public and private markets making it critical that Internet industry players are on top of what firms are being acquired and for what price."

About Bond & Pecaro

Bond & Pecaro provides valuation and financial consulting services to major players in the television, radio, cable television, media, technology, and newspaper industries. In recent years, the firm has focused on emerging technologies, such as new media and Internet-based businesses. Bond & Pecaro's professionals have appraised over 3,000 media and technology concerns. Firm members have extensive experience in market research, valuation-related tax matters, financial and economic analysis, and litigation support.

For additional information about Bond & Pecaro, or to place an order for their 161-page, "CyberValuation 2000" study ($695), Call 202-775-8870 or visit www.CyberValuation.com

Bond & Pecaro's "CyberValuation 2000" Report: SUMMARY FINDINGS

The study highlights the value creation opportunities inherent in the recent round of Internet IPOs. The IPO market is ascribing large premiums to Internet companies that garner a critical mass of subscribers, viewers, or customers. In many instances, the IPO valuation multiples substantially exceed the multiples paid for Internet companies in asset or stock acquisitions

Merger and acquisition activity remained strong in the portal sector as companies raced to add content and services to complement and extend company brands. Portal revenue and operating profit potential is difficult to predict at this early stage of development, but buyers and investors were willing to pay multiples of 110 to 120 times revenues or $404 to $453 per each monthly unique monthly visitor to invest in companies within this segment.

Prior to the Spring of 2000, prices paid for Internet retail companies in the 37 to 51 range were commonplace. The multiples paid for such businesses reflect a radically different marketplace for goods and services or a reordering of the retail distribution pipeline.

As a group, the weighted average multiples paid in ISP transactions were lower, typically within the 20 to 25 times revenue multiple and $1,682 to $2,026 per subscriber range. Multiples were driven lower on average due to competitive pressure on prices and increasing competition from broadband access providers.

Valuation multiples grew rapidly in the B2B sector as buyers and investors began to see the efficiencies afforded by numerous new business-to-business e-commerce entities. The weighted average trailing multiples fell within the 46 to 50 times range of B2B companies.