WHEN Microsoft spends $6 billion (£3 billion), Google splashes out $3 billion and the advertising titan WPP spends $650m – all in the space of a few weeks – you know something is up.

They have all spent fortunes to strengthen their position in the rapidly evolving world of online advertising. Last Friday Microsoft bought Aquantive for an astonishing price, and in cash, too. Its offer was an 85% premium to the previous day’s closing price.

After missing out on Double Click – the advertising firm bought by Google – Microsoft couldn’t afford to miss out again.

This is a land grab and Aquantive is one of the last big properties around. The company – a Seattle neighbour of Microsoft – is best known (although that’s surely not the right phrase) as the owner of Avenue A Razorfish, one of the longest-established digital-marketing agencies.

Online advertising is already a big and fast-growing business, measured in tens of billions of dollars, but Microsoft et al are betting that we ain’t seen nothin’ yet.

As internet media and television converge, the tools and services offered by the likes of Aquantive will become increasingly important. The measurability of advertising spending – best exemplified today by Google-style search-based ads – will become much more widespread. Google is already looking to spread its tentacles into newspaper, radio and TV advertising.

Publicis, the French owner of Saatchi & Saatchi, started this stampede with the purchase of Digitas a few months ago. Yahoo, the current leader in banner ads, recently bought out Right Media, paying many multiples of the valuation implied by the price it forked out for a 20% stake last year. Shareholders in the remaining independents (including AIM-listed Burst Media) must be rubbing their hands with glee.

Quite apart from anything else, Friday’s acquisition – by far Microsoft’s biggest – shows that the software giant is deadly serious about advertising, even though it poses a threat to its legacy business selling licences for Windows and Office.

Whether Aquantive can survive the deadening effect of Microsoft’s bureaucracy and culture is another matter. But Microsoft has 6 billion reasons to make this deal work.

The royal nod

THE debate on the role of private equity may no longer be making headlines, but the industry is working hard to win over the hearts and minds of those who see the firms as rampant profiteers.

Among those it has tried to charm in recent weeks is Prince Charles, who entertained the elite of Britain’s private equity at his residence, Clarence House. The setting could not have been more incongruous. If ever there was a set-up more ripe for cost-cutting, Clarence House must be it. But Charles was not interested in finding ways to cut his annual spending.

Like many others, Charles has been suspicious of private equity, sympathising with the argument that it rips companies apart with the spoils shared by the few.

But according to those present at the lunch, Charles is now less cynical about its role in business. Although he may still have concerns about private equity’s commitment to environmental issues and social responsibility, the meeting serves to show how private equity is attempting to influence opinion after its reputation has been mauled following a series of high-profile bids.

The lunch had been organised by Bob Wigley, Merrill Lynch chairman of Europe, Middle East and Africa.

Also in attendance were Damon Buffini of Permira, Robin Hall of Cinven, Martin Halusa of Apax and Mike Smith of CVC. This group does not always sing in unison, but it shows how private equity is trying to present itself as the acceptable face of capitalism.

But private equity cannot afford to stop here. It is essential that the report it has commissioned into the industry by Sir David Walker, former Bank of England director, has some real teeth and recommendations on the need for more disclosure. The real deal WE all know how rapacious bankers are in putting their names to deals, and Blackstone’s fledgling M&A team was no exception last week when it claimed credit for engineering Reuters’ proposed merger with Thomson. Blackstone was involved, but the real driver was Robin Budenberg, head of equity-capital markets at UBS. He is what relationship banking is all about: long term and behind the scenes. Tom Glocer, Reuters chief executive, is receiving universal applause for the dual-listed share structure, but it was Budenberg who came up with the idea. Long live relationship banking.

Search for a star

THIS is the big one. The largest-ever prize for business offered in a national newspaper. As you will read by clicking here, this competition, in partnership with Bank of Scotland Corporate, is one of the boldest initiatives undertaken to find and back tomorrow’s generation of entrepreneurs.

Drive, energy, passion and determination are all essential qualities for any entrepreneur – and so is cash. That is what is on offer to the five regional winners of this competition, which will provide up to £25m of interest-free funding for three years. This is a real opportunity and I urge all those who are eligible to enter. We may even unearth one of tomorrow’s corporate giants.

john.waples@sunday-times.co.uk

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