Online companies awash in cash could lead a wave of consolidation that is poised to sweep over the media landscape, the former head of AOL said Thursday.

Speaking at the Digital Hollywood Media Summit in New York, just minutes after Microsoft CEO Steve Ballmer again signaled an interest in Yahoo, Jonathan Miller forecast a spurt in mergers and acquisitions spurred by the sharp contraction in valuations.

“Who’s going to do the acquiring? It could be the new digital media companies that have all that cash,” he said.

Mr. Miller, the former CEO of Time Warner’s AOL unit and co-founder of venture capital firm Velocity Interactive Group, said the coming M&A burst also could force the industry to rethink the idea of an integrated media company.

Media companies like Disney, News Corp., Viacom and Time Warner traditionally have included television, movie and print units.

Speaking at the same event, Mr. Ballmer said a deal for Yahoo’s search unit would add a critical mass of users to Microsoft. The Redmond, Washington, software giant remains a distant third in Internet search with an 8.2 percent share in February, according to comScore. That compared to 63.3 percent for Google and 20.6 percent for Yahoo.

Despite Mr. Ballmer’s oft-restated desire for a deal, he said he has had only one perfunctory conversation with Carol Bartz since she took the reins as Yahoo CEO in January.

At the conference co-sponsored by BusinessWeek and Standard & Poor’s, Mr. Miller said that the global economic downturn has created havoc in the venture capital model.

Whereas startups once could attract angel funding followed by several venture capital rounds, Mr. Miller said that a single funding round is “the norm” now.

“Now anyone who says they need three rounds of financing to break even—no one’s looking at them,” he said.

Mr. Miller, whose firm invests in a digital and media startups, said investors are taking a “pregnant pause” as they wait for a “catalyst” to release cash.

Though he has misgivings, Mr. Miller said, that catalyst could be the government.