Will the Espotting deal with FindWhat collapse?
When first announced, the merger of FindWhat (FWHT) with Espotting looked like a rosy deal for the UK based PPC search engine. But when FindWhat released a statement that it planned to renegotiate the terms of the merger, Espotting looked like it might be hung out to dry.

According to netimperative, FindWhat said it was renegotiating the merger as a result of its post-signing examination of Espotting's historical data, suggesting that it may have found some surprises in Espotting's books. It previously estimated that Espotting would have 2003 pro forma earnings of $7.5m on revenue of $75m, but has now retracted all prior statements made regarding Espotting's historical and projected financial performance.

But it is well aware that Espotting's cash position is weak, having already advanced the company $2m after the deal was signed in June. Should the deal fall through, Espotting is likely to be required to pay the loan back, which could force its hand in renegotiations over the merger terms. Some industry sources have suggested that the renegotiations will see the merger become more of a takeover, and that FindWhat will push for more control by getting rid of the majority of Espotting's existing management team.

So where does all this leave Espotting? The issue is likely to be resolved by lawyers, since its merger with FindWhat now looks an essential route to survival. Whether it will be forced to agree to a less sweet deal will come down to the balance between ensuring the deal goes through and the finer print of the deal already signed.
Andy Beal | permalink | +marktd |