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When Cash Isnt King

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by Felix Salmon
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Oct 29 2007 12:00am EDT

When Cash Isn't King

The WSJ's Jessica Vascellaro has an interesting article about what Jeff Bercovici calls the "Diller-Malone marriage": two media moguls fighting over control of a bunch of internet properties which presently goes by the unwieldy name of IAC/InterActiveCorp. IAC bought also-ran search engine ask.com in 2005, for stock, a decision Malone is unhappy about:

"If it had been me, I would have been willing to pay a higher price" to do a cash transaction, Mr. Malone says. "Barry doesn't use his balance sheet effectively. He is not a financial guy."

Now I understand that Malone would like more leverage in IAC, and if he can't persuade Diller to get there through financial engineering, he'd be just as happy to see IAC's cash pile run down through acquisitions. But it seems to me a bit of a stretch to go from there to saying that he would actually be willing to pay more for ask.com if he was paying in cash than if he was paying in stock.

Generally, in any M&A deal, an all-cash transaction is the gold standard, the benchmark against which all other deals are measured. Typically you need to pay more, if you're paying in scrip. If Malone is going to go on the record about Barry Diller being "not a financial guy," then he might want to use a better example than Diller's refusal to pay a premium for the privilege of paying in cash.

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