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As we head into the hot days of summer, the economic and M&A pictures are somewhat brighter than they were a year ago, although the prospects for a sustained recovery remain an enigma after a dismal second quarter for U.S. stock prices. Strategic buyers are finished with cost cutting initiatives and are looking to accelerate growth via acquisitions; plus, many strategic companies have strong balance sheets for M&A. Private equity firms must deploy $400 billion to $500 billion of uncommitted capital, and the credit markets have started to ease and interest rates remain low. Sellers have been on the sidelines for 18 months, and the anticipated tax changes in 2011 (i.e., increased capital gains taxes and a change in the treatment of private equity’s carried interests) will pull sellers forward into 2010. Despite a mixed bag of recent economic indicators (i.e., stronger manufacturing stats, weaker jobs report), a strong group of buyers (strategic and PE) has re-entered the market, and many deals are pricing at stronger multiples. This is especially true for marketing services, interactive and technology-driven companies, as the digital revolution continues to drive the re-tooling of traditional business models. Sellers are still more confident than they have been in nearly two years that their businesses will price well in today’s marketplace, given the many favorable dynamics currently at play.
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Our first half M&A stats show that there were nearly 450 M&A transactions in the media, information, marketing services and related technology sectors, with a total value of $21 billion. While the number of M&A transactions during the first half of 2010 surpassed levels from the market peaks of 2006 and 2007, it is interesting to note that the deals on average have been significantly smaller. For example, average deal size in the first half of 2010 was around $46 million, compared with average deal sizes of $120 million and $166 million in the first halves of 2006 and 2007, respectively. |
On the recent transaction front, JEGI is pleased to announce that its client Hearst Corporation officially completed its acquisition of global interactive marketing services and technology company iCrossing (JEGI’s 10th completed deal of the year). This innovative and unique acquisition by Hearst provides the company with extensive global digital marketing capabilities, as it looks for new ways to reach key audiences through digital marketing for its brands and advertisers. It is also reflective of efforts by traditional media companies to build a presence in interactive marketing services, and we expect to see similar transactions in the months ahead.
I’m also pleased to announce that we have reinforced and expanded the JEGI team. The firm has elevated three executive team members during the first half of the year – Managing Directors Scott Peters and Tolman Geffs were promoted to Co-Presidents and our Vice President of Marketing Adam Gross was promoted to Chief Marketing Officer. Amir Akhavan, Sam Barthelme and Michael Buse of our Professional Support team all received promotions as well.
Finally, we have added a new Managing Director, Eric Lint, formerly of Dun & Bradstreet and Thomson Reuters, who will focus on the firm’s leading M&A practice in the financial services sector. Eric has prepared a very informative article on Financial and Credit Information & Technology that sizes these markets at $40 billion in annual revenue, with expectations of them reaching nearly $45 billion in 2012, according to Outsell, the leading research firm for the information industry. With new technologies continuing to emerge, JEGI expects strong deal activity in these markets into 2011 and beyond.
We also hear from senior and mezzanine debt providers in this edition of the Client Briefing, who as a group are comfortable providing total leverage of 4x to 5x (senior and mezzanine combined) on a deal at a 50/50 debt to equity ratio. Overall, lenders are bullish that there will be more debt liquidity and more deal flow in the second half of 2010, as compared to the first half of the year. They are focused on supporting businesses with recurring revenue streams, as well as those that have been able to sustain their business models and maintain customer bases through the downturn.
We are delighted once again to be co-producing Outsell’s Signature Event, which will be held September 29 to October 1 at the Ritz Carlton in Key Biscayne, FL. We have a terrific line-up of speakers, including keynote speaker Tony Hsieh, CEO of Zappos.com and author of “Delivering Happiness”; Mike Murphy, Head of Global Sales for Facebook, who will join Wenda Harris Millard, President, MediaLink and former co-CEO and President, Media for Martha Stewart Living, on stage for a fireside chat; John Loughlin, Executive VP & GM, Hearst Magazine Group, who will share his insights on Hearst’s recent acquisition of iCrossing and its strategic decision to invest in interactive marketing services; David Wyss, Chief Economist, Standard & Poor’s, who will provide a global economic outlook; and many more. This exclusive, invitation-only event will bring together about 200 CEOs from across the global media, information and technology markets. For more information and to register, click here. |
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JEGI's
June 2010
Emerging Company Dinner
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JEGI hosted its second Emerging Company Dinner of 2010 on June 1st at the 21 Club in New York City. (From left) Matthew Egol, Partner, Booz (sponsor and moderator); Michael Hansen, CEO, Health Sciences, Elsevier; Wilma Jordan, Founder & CEO, JEGI; Thomas Quinlan, CEO, R.R. Donnelley; and Andrew Prozes, CEO, LexisNexis. |
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Speaking of events, Tolman Geffs, one of JEGI’s Co-Presidents, gave an in-depth presentation on the value of content, as data increasingly becomes a focus area for most advertisers and marketers, at IAB Innovation Days @ Internet Week on June 8th in New York City. This well-received presentation was accompanied by a very entertaining video on online advertising built off the Wizard of Oz. The presentation can be found online at: http://bit.ly/agWWYI and video: http://bit.ly/aRaV52.
I wanted to call your attention to MITX’s (Massachusetts Innovation & Technology Exchange’s) FutureM, a first-ever, week-long conference in Boston being held October 4-8 and offering participants the opportunity to tap into the freshest thinkers in marketing, media and technology. JEGI is a proud supporter of the event, and on October 7th from 8:30AM to 10:30AM, JEGI will host a panel discussion titled “Harnessing New Methods of Consumer Engagement” focused on how consumer engagement remains the critical ingredient of successful marketing platforms and campaigns. JEGI will bring together industry experts from across the marketing services and technology sectors to lead this discussion. For more information on this week-long event and to attend JEGI’s session, visit: www.futurem.org.
We are optimistic about the year ahead, albeit concerned about the domino-like interdependence of the fragile global economy. I hope you enjoy this edition of the Client Briefing. Please feel free to contact us to discuss the marketplace and your company’s M&A and strategic advisory needs.
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