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DM85 million to you, squire

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Ace-quote.com, the only Welsh dotcom we've heard of, has sold itself to German Company DCI for DM85 million in cash.

The deal should provide a nice turn on investment for Antfactory, the Internet incubator, which recently pumped in 900,000 quid, in return for an undisclosed (but minority stake)

Acequote's existing management team, led by Gary Munz and Helga St. Blaize, will continue to run the operation under its existing brand.

But clearly it has the additional comfort zone of being part of one of Europe's biggest B2B online marketplaces.

Munich-based DCI.de (Database for Commerce and Industry.AG)is listed on the Neuer Market and commands a market capitalisation of DM 1.3 billion. In common with Ace-quote, it operates a reverse-auction model for the IT industry with customers inviting suppliers to tender for their business.

The combination of Ace-quote and DCI makes good sense with the pair operating a common B2B marketplace model, but in different territories. Scale is the issue here - B2B Reverse auctions are an interesting concept, but an unproven business model. B2B marketplaces require mass, particularly on the buying side (it's easy enough to get sellers to register), if they are to have any meaningful existence.

Marketplaces tend also to form into natural monopolies - it is difficult to imagine that there will be more than two or three B2B reverse auction sites in the IT industry. More likely, one marketplace will end up as the winner.

Mass requires money (or market capitalisation), something in shorter supply at Ace-quote than at DCI. With the jitters in today's markets, privately-owned Ace-quote was never likely to approach anything like the stock market capitalisation commanded by DCI.

Interesting, though that the management team sold out the entire share capital to DCI, for cash. That doesn't sound like a team that wants to stay around, for so very long.

It's unclear from the press statement accompanying the takeover, is how much of the cash is going into the owners' pockets, how much is to pay off debt, and how much to fund future working capital requirement. ®

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