JEGI Q1 2015 M&A Overview: A Strong First Quarter Indicates an Active Year for M&A
New York, NY April 2, 2015 – Mergers & acquisitions in the media, information, marketing, software and tech-enabled services sectors continued the robust pace of 2014, with 545 transactions announced in the first quarter of 2015 at a total value of $26.6 billion. Deal activity and value were consistent with Q1 2014, against a backdrop of strengthening consumer and business confidence and strong M&A volume across all business sectors, according to The Jordan, Edmiston Group, Inc. (JEGI) (www.jegi.com), the leading independent investment bank across these core markets.
Software & Tech-Enabled Services
Software & Tech-Enabled Services was the largest sector in terms of number of transactions and deal value, with 346 transactions valued at $13 billion for the quarter. The charts below show a breakdown of deal volume by segment for this sector in Q1 2015.
Application software was the most active segment, accounting for one third of deal volume. The most significant application software transaction in Q1 2015 was SS&C Technologies’ acquisition of Advent Software, provider of vertical applications for the financial services industry, for $2.5 billion.
IT services and distribution was the second most active segment in the Software & Tech-Enabled Services sector, totaling 20% of deal activity. Large transactions in this segment included the Science Applications International Corp. (SAIC) acquisition of Scitor Corporation, a provider of systems engineering, management consulting, and information services, for $790 million, and the Maximus acquisition of Acentia, a provider of technology and management solutions to the healthcare, financial and regulatory markets, for $300 million.
Marketing Services & Technology
Marketing Services & Technology was the second most active sector in terms of both deal volume and value, with 128 transactions that generated $3.5 billion of deal value in Q1 2015. Nearly half of the sector’s transactions occurred in the traditional agency, digital agency and marketing technology sub-sectors. However, the most active sub-sector in terms of deal value was marketing research/consulting services, primarily due to Court Square Capital Partners’ acquisition of Research Now (terms not made public).
Out-of-home marketing also accounted for substantial deal value within Marketing Services & Technology, due to the GTCR and Adams Outdoor Advertising $575 million acquisition of Fairway Outdoor Advertising from MidOcean Partners and Acon Investments.
The ad technology sub-sector was the third largest in terms of deal value, with Nielsen’s acquisition of eXelate for a reported $200 million, AppNexus’ acquisition of Yieldex for a reported $100 million, and Vector Capital’s acquisition of Triton Digital for an undisclosed amount. The ad agency sub-sector followed closely behind, given WPP’s $250 million investment in Bruin Sports Capital, with the data & analytics sub-sector next, due to Kantar/WPP’s investment in comScore for approximately $255 million.
Following a strong first quarter of 2015, with four deal closings and a robust pipeline of M&A engagements and opportunities, JEGI is optimistic for a vibrant M&A market in 2015. The economy continues to show improvement. According to the Bureau of Labor Statistics, US unemployment fell to 5.5% in February – the lowest rate since May 2008. In the corporate sector, companies are confident and active acquirers, with ample balance sheet cash, low interest rates and advantageous debt markets.
Most of the participants at JEGI’s 11th annual Media & Technology Conference on January 15th in New York City also agreed that 2015 will be a busy year in the M&A market. Davis Noell, Managing Director at Providence Equity Partners and a panelist at the 2015 Conference, said, “In 2014, the markets were open in every way possible: the debt markets were open for recaps; the IPO market was open; there were huge corporate mergers; and we saw big private market valuations. That will likely continue in 2015.”
Here at JEGI, we had a strong start to 2015 with the sale of 3Q Digital, a leading digital marketing agency with a wide array of services, to Harte Hanks; the sale of ecVision, a cloud-based provider of global sourcing and collaborative supply chain software solutions, to Amber Road; the sale of Mobile Motion, founder of Mobile Media Summit, the largest mobile conference series in North America, to Comexposium; and the sale of Summit Professional Networks, a leading information and marketing platform serving the insurance, financial and legal markets, to ALM. JEGI has a robust pipeline of deal activity and active engagements and is looking forward to a successful year.
M&A Highlights for Q1 2015
The b2b media and technology sector had 28 transactions in the first quarter of 2015, compared to 31 in Q1 2014. Deal value declined to $1.5 billion, down from $2.5 billion in 2014, due to two large transactions in Q1 of 2014 – Walt Disney’s acquisition of Maker Studios for $950 million and Apax Partners’ acquisition of a 50% stake in Trader Media for approximately $979 million. Notable 2015 transactions included: MacMillan Science and Education’s acquisition of academic publisher Springer Science+Business Media from BC Partners; Genstar Capital’s acquisition of Telestream, provider of on-demand digital media video tools, from Thoma Bravo for a reported $190 million; and ALM Media’s acquisition of Summit Professional Networks, a leading information and marketing platform serving the insurance, financial and legal markets (a JEGI transaction).
The consumer media and technology sector declined in deal volume in Q1 2015, with 44 transactions vs. Q1 2014’s 48 deals, while deal value rose slightly to $3.2 billion in value. Notable deals in the first quarter of 2015 included: Expedia’s acquisitions of three online travel sites, Orbitz, Travelocity and Decolar, for $1.7 billion, $280 million and $270 million, respectively; Rakuten’s acquisition of OverDrive, e-book, audiobook and streaming video platform, for $410 million; Yelp’s acquisition of online restaurant ordering platform Eat24Hours.com for $134 million; and Meredith’s acquisition of fitness magazine SHAPE from Weider Publications for $60 million.
The database and information services sector dropped in number of deals announced in Q1 2015 to 11, compared to Q1 2014’s 15 deals. Deal value, however, almost tripled in 2015 to $3.2 billion, due to Verisk Analytics’ $2.8 billion acquisition of Wood Mackenzie, global energy, metals and mining research and consultancy group. Other notable deals this quarter included the Nasdaq OMX acquisition of index provider and analytics firm Dorsey Wright & Associates for $225 million and the Dun & Bradstreet acquisition of data management solutions provider NetProspex for $125 million.
The exhibitions and conferences sector saw an increase in deal volume with 24 transactions in the first quarter of 2015 vs. 19 in the same period of 2014. Deal value rose sharply to $831 million in 2015, compared to $162 million in 2014. Notable transactions for 2015 included: Providence Equity Partners’ acquisition of Clarion Events, organizer of more than 200 events worldwide, from Veronis Suhler Stevenson and Trilantic Capital Management for a reported £200 million; Inflexion Private Equity Partners and NVM Private Equity’s acquisition of business events organizer CloserStill from Phoenix Equity Partners for approximately £100 million; and Comexposium’s acquisition of Mobile Motion, founder of Mobile Media Summit, the largest mobile conference series in North America, for an undisclosed sum (a JEGI transaction).
Although the marketing services and technology sector continues to be very active, deal volume and value declined in Q1 2015 vs. Q1 2014. 2015 saw 128 transactions, compared to 154 in 2014. Deal value totaled $3.5 billion this quarter, down from $7.7 billion this time last year, mainly due to several large Q1 2014 transactions, including Berkshire Partners’ acquisition of a majority stake in Catalina Marketing in a deal valued at approximately $2 billion. Beyond the notable deals highlighted in the Marketing Services & Technology segment above, other deals of note for the quarter included the: ICON Public acquisition of MediMedia Pharma Solutions, provider of marketing and communications services for scientific and medical companies, for $120 million; Alibaba Group acquisition of ad platform AdChina for an undisclosed sum; and Harte Hanks acquisition of 3Q Digital, a leading provider of digital marketing and online customer growth services, for an undisclosed sum (a JEGI transaction).
M&A activity for the mobile media and technology sector rose in both number of deals announced and deal value in the first quarter of 2015, to 54 transactions and $2 billion in value. Notable Q1 2015 deals included: Under Armour’s acquisition of MyFitnessPal, a mobile nutrition and calorie counter app, for $480; PayPal’s acquisition of mobile wallet and payment solution provider Paydiant for $280 million; Harman International’s acquisition of mobile software provider Red Bend Software for $200 million; and King Digital Entertainment’s acquisition of mobile game developer Z2Live for $150 million.
The software and tech-enabled services sector increased in both deal volume and value in Q1 2015, totaling 346 transactions and $13 billion in value. Deal value was led by a few mega transactions including those listed in the Software & Tech-Enabled Services segment above. Other notable 2015 transactions included: Bain Capital’s acquisition of network security company Blue Coat Systems for $2.4 billion; Lexmark International’s acquisition of Kofax, provider of business process management (BPM) software and related maintenance and professional services, for $1 billion; and Amber Road’s acquisition of ecVision, provider of global sourcing and collaborative supply chain software solutions (a JEGI transaction).