[SwellJoe]

OK, I guess if we keep going lower and lower, I can see at some point the language/infrastructure transition costs become a significant portion of the acquisition.

It'd depend on the product, I think. A half million line codebase would cost millions to translate, while 40k lines would cost a max of tens of thousands (assuming languages of similar capabilities--like Ruby-Python-Perl). But, a half million lines of code isn't going to go for $1.5M except in a fire sale.

But, I reckon this has some bearing on folks building on Google App Engine. That's a bigger form of lock-in than most, and since the apps being built there will be quite small for the foreseeable future, it makes the barrier to exit much higher for folks who might have been willing to sell for $1.5M but could only get an offer of 1M from GOOG or 800k from somebody else (because they would then have to port the application, even if they don't mind it being in Python).

So, I obviously buy your reasoning once you get down into the single digit millions (or sub-million) acquisition prices, and I also buy your reasoning that those kinds of acquisitions are becoming a lot more common.