A lawsuit launched by DoubleClick Inc. against small Australian rival Sabela Media may have backfired on the Internet advertising giant.
Another competitor, U.S. adserving company 24/7 Media Inc., has snapped up Sabela following a whirlwind three-day courtship.
The deal, which values the 18-month-old company at A$100 million (US$65.9 million), took only days to consummate in New York last week after initial overtures from 24/7 Media. DoubleClick's lawsuit helped drive Sabela into 24/7's arms by casting doubt on a A$12 million venture capital raising by Sabela.
"The lawsuit had an impact and we were faced with finding (funding) alternatives," said Sabela co-founder and executive chairman Gour Lentell.
"Acquisition would not have been our preferred option but when it came along, we thought it was a good opportunity."
A small component of the purchase price is in cash and the rest in 24/7 Media stock. As a subsidiary of 24/7 Media, which claims to reach more than 55 percent of U.S. online users, it will be business as usual for Sabela and its customers in Australia and New Zealand, Lentell said.
Under the terms of the merger Sabela's three founders, Lentell, David Turner and James Green are committed to stay on for at least two years. 24/7 Media already has a small Australian presence via a joint venture with China.com but it will remain a completely separate operation, at least initially, Lentell said.
The decision to join forces was made easier by obvious synergies between the two organizations, he said. The personalities of the senior management teams in both companies also mesh well.
The companies' individual strengths will reinforce each other to provide customers with richer user profiles and data analysis capabilities - a strategic direction being followed by the entire industry, Lentell said.
Sabela was acquired by 24/7 Media in full knowledge of the legal proceedings initiated by DoubleClick, he said. If DoubleClick's lawsuit was designed to rid itself of a smaller rival, the ploy seemingly has misfired. As part of the much larger, better funded 24/7 Media, Sabela's ongoing viability has been reinforced rather than reduced. However DoubleClick Australia Managing Director Rod Bryan rejected suggestions the merger will necessarily create a stronger competitor.
Merging companies often face problem-filled transition periods which are unsettling both for themselves and their customers, he said.
The lawsuit launched by Doubleclick claims Sabela has violated U.S. patents held by DoubleClick on technology that serves up advertisements on the internet.
DoubleClick has initiated similar legal proceedings against U.S. adserving firm Latitude 90 and there are rumors it will also file against Adforce, Adknowledge and Flycast - all U.S. adserving companies.