These deals do happen all the time, but you don't hear about most of them because they're not in the sexy (resisting urge to say bottom joke) Web 2.0/social networking space.

Instead, they tend to happen in more boring (but profitable) areas like accounting or security software.

This site (a boutique broker specializing in software acquisitions) has a list of recent M&A deals along those lines: http://corumgroup.com/CorumTransactions.asp