TechTarget confirmed last week that it will pursue an initial public offering in 2006. The company had hired investment bank UBS to explore its valuation in the mergers and acquisitions market. In the process, TechTarget concluded that an initial public offering would provide more value to its three key constituencies: customers, shareholders and employees.
In a statement, the company said, "TechTarget has decided to continue on the path of growth as an independent company and to make the appropriate preparations that will enable it to explore a public offering in 2006."
Needham, Mass.-based TechTarget also announced that it is restructuring its management team. Kevin Beam, who has led TechTarget's Storage, Security and Windows media groups, will add the company's four other media groups to his responsibilities: CIO Decisions, Networking, Application Development and Enterprise Applications.
In conjunction with this change, three VPs are leaving the company: Joe Levy, Paul Gillin and John Cox. Greg Strakosch remains CEO, and Don Hawk remains president.
More than 100 jobs added
TechTarget said it has added more than 100 jobs this year and expects to add the same number next year.
Media investment bankers speculated that the M&A process revealed that the company could be made more attractive to investors with a streamlined management structure.
A source at the company said the three departing VPs were leaving for personal reasons. Levy reportedly is leaving because he joined the company solely to launch CIO Decisions, a task he has completed. Gillin is leaving to create a new business, and TechTarget will be one of his first clients. And Cox is leaving after six years of commuting to Massachusetts from Connecticut.
Some analysts were bullish on TechTarget's IPO plans. "It'll give them currency for future acquisitions," said Reed Phillips, managing partner of media investment bank DeSilva & Phillips. "But a lot depends on how they use the funds-whether they give them to shareholders or use them for growth."
Meanwhile, other industry observers speculated that TechTarget's choice of an IPO indicated that it was unhappy with the valuation by the M&A market. Some sources said TechTarget's valuation would be north of $500 million in an IPO.
One investment banker, who requested anonymity, said that valuation was very optimistic, even for a fast-growing Web business that posted a 51% gain in revenue in the first six months of this year, compared with the same period in 2004.
too Traditional looking?
"TechTarget is a great business but looks more like a traditional b-to-b publisher with a high fixed editorial cost base than a super-scalable Web-based model," the banker said.
Another financial observer, who requested anonymity, questioned TechTarget's strategy. "If you're not of a certain size, you're not going to have analysts following the stock, which makes it hard to get liquidity," said the source. "TechTarget doesn't have that size."
He added that the "lure of an IPO is you can sell the company to the public better than you can to a third party, and there have been smaller companies that have done IPOs and developed nicely." But once a company is on the board, "the value of the stock is as much a subject to the vagaries of the market as it is the performance of the company."