• by Laurie Sullivan  @lauriesullivan, November 3, 2009

The initial public offering (IPO) market continues to get stronger. Venture capitalists investing in fledgling businesses are not the only ones with billions of dollars to spend. Early in 2010, companies with money to burn will likely start chasing deals, according to one middle market advisory firm.

Michael Maxworthy, partner at Marlin & Associates, thinks IAC/InterActiveCorp Barry Diller's recent comments on the conference call with Wall Street analysts that the search business is "challenging" and its future is "speculative" signals that the company is looking for a buyer, but doesn't believe Microsoft will become the suitor.

Microsoft's recent rebranding and launch of the search engine Bing puts the company in a bad position to do the deal. The Redmond, Wash. company would rather partner to compete against Google, Maxworthy says. And although buying Ask.com might not be a positive move for Microsoft shareholders, it would allow it to consolidate search engine market share.

But Microsoft needs to proceed cautiously. After the deal with Yahoo to power its back end, acquiring Ask.com could send mixed messages to investors. Spend tons of money to launch and promote Bing just to buy a competitor? Bad move, Maxworthy says. The probability that Microsoft would become the highest bidder in the end is very low. "The buyer would mostly come from the larger media or content company," he says. "News Corp. is high on my speculator list."

Steve Pelletier, FatTail CEO, isn't sure how much Ask.com has to offer as a stand-alone service, but it could make more sense for New Corp to acquire the search engine to integrate it into a social site, such as MySpace.

"I can see a social network extracting more value out of it because they're not competing directly with Google," Pelletier says.

But Ask.com could have bigger problems now that Diller has hung out the "For Sale" sign. Some believe it will become very difficult for IAC to sell off Ask to a suitor -- basically because the industry views the search engine as failing to create a foothold in any particular niche or skill that is worthwhile or of interest.

"There is nothing, I think, anyone can point to that has significant dollars associated with it that tells me Ask can do a better job than Google, Microsoft or Yahoo," says Darrin Clement, Maponics CEO. "Brain drain now becomes the main problem, because Barry Diller announced he's interested in selling. Their most talented people will start to leave. As a result, if he doesn't do something extremely quick, what little value there is in the search engine will diminish further, and Ask will become a ghost of itself within the next three to six months."

Clement says Diller should figure out how to turn Ask.com into an enterprise-based solution rather than a public search engine. The company doesn't have any technology that couldn't be built by a newly assembled team, he says.