Non-Strategic Management: Sizzle Fizzles

“Barry Diller hoped breaking up IAC/InterActiveCorp would eliminate the ‘Diller discount’ that had bedeviled the shares. It's early… but so far the split-up hasn't exactly set the world on fire.

“On Aug. 20, the e-commerce company split into five: Ticketmaster; lending business Tree.com; home-shopping company HSN; Interval Leisure, a time-share provider; and a slimmed-down IAC, a collection of Internet properties…

“The new IAC, which Mr. Diller will continue to run. It was designed as a pure Internet portfolio whose stock, freed of the weight of underperformers, would soar.

“Instead… Wall Street is valuing the operating businesses at barely $1.1 billion, or an undemanding multiple of 5.5 times Ebitda. Google enjoys a multiple of 11.6; Amazon.com, 18.7; and slower-growing eBay, 7.4, says Cowen & Co.

“IAC is hardly set to expand at Internet speed. Sanford Bernstein estimates revenues will increase 11.5% in 2009 compared with 16.1% at eBay….

“Then there is the Diller factor.

“The onetime Hollywood executive, who once brought ‘sizzle’ to stocks with which he was associated, has taken a company that began in the mid-1990s as a collection of TV stations and HSN through a series of dizzying strategic twists and turns to end up where it is today.

“Mr. Diller has thrown hundreds of millions of dollars at a series of forgettable acquisitions, including Precision Response Corp., Styleclick and Cornerstone. More memorable, and painful, for investors is Lending Tree. IAC paid about $700 million for the lending concern in 2003. Tree.com's stand-alone stock-market value is now roughly $75 million…

“Even after the recent split, IAC remains a complex mix of businesses. The best chance for IAC shareholders to realize the true value of the assets is for Mr. Diller to take the next step and sell off the remaining pieces of his empire.”

(“IAC Story Not as Planned; Multiple Spinoffs Haven't Eliminated A 'Diller Discount'.” Martin Peers. Wall Street Journal: September 3, 2008. pg. C.18)

"FORGETTABLE" ACQUISITIONS? Hardly! Destroying $625 million seems pretty darned memorable we might think.

Perhaps the heart of our problems is in our forgetting, or trying to forget, foolishness of the past. Just because a seeming "strategy" worked once upon a time, should we continue to whip that dog into oblivion... ?

Can't we teach an old dog the (old) lesson -- synergies are mightily elusive, and mergers generally do destroy wealth!?