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This was a company that had been in business for less than a year with a relatively small staff, but had a great idea.

The (rumored) back story on the deal is that a fairly short time after they went live with the service, there were approached by two interested acquirers.  A (rumured) sort of bidding war ensued, resulting in a sale that has now been confirmed at over $70 million.

From McAfee’s recent 10–Q:

On April 3, 2006, we acquired 100% of the outstanding capital shares of SiteAdvisor Inc., a web safety consumer software company that tests and rates internet sites on an ongoing basis. We believe the technology and business model that SiteAdvisor has developed is not currently available in the marketplace and it will allow us to enhance our existing product offerings and add value to the McAfee brand. The purchase price of the acquisition included approximately $60.8 million of cash payments made to the former SiteAdvisor shareholders and approximately $0.3 million of direct acquisition costs. We have also agreed to make $9.3 million of cash payments to certain SiteAdvisor employees and advisors over the next two years that will be contingent upon their fulfillment of future service obligations. These payments will be recorded as an expense during the periods in which they are earned. The financial results of SiteAdvisor will be included in our results of operations from the date of acquisition. We have not received a final independent appraisal of the acquired assets and liabilities. Accordingly, we cannot provide the purchase price allocation or the valuation of acquired intangible assets at this time.

Of course, with a deal of this size that happens so quickly, it must be causing short-term capital gains problems for the company’s backers (Bessemer Ventures).

I’m sure no one is feeling sorry for them.

Alex Eckelberry