The Buyside

Going Local Underlies Angie's List Deal

Strategic buyers have taken notice of local neighborhood web services

Using the Web to review and buy local neighborhood services is a growing trend among consumers, and strategic buyers have taken notice. Angie's List Inc. (Nasdaq: ANGI), for example, recentlly bought SmartHabitat Inc., a startup that does business as BrightNest, for $2.65 million in cash. The purchase comes amid many deals among companies that specialize in providing local products and services.

The customer appeal of these types of services was enough to break the hiatus Angie's List had taken from mergers and acquisitions. The Indianapolis company, which enables members to hire and review local contractors in hundreds of categories from home improvement to health care, announced the purchase of BrightNest in August - the company's first transaction since 1996, when it bought Unified Neighbors.

Competition for BrightNest, an online resource for home owners, was reportedly heated, with larger rivals vying for the Denver-based startup. The service draws on the same concept as several other targets that were scooped up in recent months: connecting people with local services and professionals.

Similar M&A activity has been seen among online food delivery companies. The most notable of those deals was the merger of Seamless North America LLC and GrubHub Inc., both online food delivery services. The deal, announced in May, will create a combined company that can serve users in more than 500 cities and about 20,000 restaurants. Delivery.com LLC followed up in June when it agreed to buy Brinkmat LLC, a provider of free laundry pick-up and delivery to New Yorkers. In July, online review company Yelp Inc. (NYSE: YELP) took over SeatMe, a San Francisco service that allows users to make restaurant reservations online.

Observers note that this spike in M&A activity among online businesses that serve local customers is being driven by an attempt to attract local advertisers that previously advertised in local newspapers.

For others, it underscores the increased focus on the Web-user experience, such as revamping search capabilities. Angie's List, founded by current CEO Bill Oesterle and Angie Hicks in 1995, has been headed down this path in recent months. The April promotion of marketing director Shelly Towns to vice president of product, a new role, was considered a step in that direction.

"The only way to transform the local services industry is to solve real problems in a bigger, better and new way," says Oesterle.

For its part, Angie's List is working on a full product redesign to meet the shifting dynamic from word-of-mouth referrals to large databases that harness worldwide customer input.

Dealmakers are expected to keep their eye on this trend for many years to come.

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