JEGI H1 2014 M&A Overview: A Few Mega Deals Drive Headlines, but Most Transactions under $50 Million
New York, NY June 30, 2014 – The media, information, marketing and technology sectors saw 752 transactions announced in the first half of 2014, at a total value of $64.4 billion. Deal volume increased by6% from 1H 2013, but with the help of Facebook’s $19 billion acquisition of mobile messaging application WhatsApp in February and several other large transactions, deal value more than doubled from 1H 2013’s $27.8 billion. Twenty four large transactions with $500+million price tags accounted for 71% of total announced deal value but only 3% of deal volume. In contrast, small deals under $50 million drove 83% of deal volume in 1H 2014, according to The Jordan, Edmiston Group, Inc. (JEGI) (www.jegi.com), the leading independent investment bank specializing in M&A advisory services across these core markets.
Dominance of Small Deals Suggests Business Confidence Remains Weak
The continuing trend of small deals dominating the M&A market raises questions about the level of confidence that entrepreneurs, corporations and investors have in the current recovery. The M&A market tends to be an accurate leading economic indicator, as demonstrated by last week’s announcement from the Bureau of Economic Analysis. US Gross Domestic Product actually declined 2.9% in Q1 2014, considerably down from the Bureau’s prior estimate of a 1% decline, and even more significantly down from the first estimate, which showed a 0.1% increase. The Wall Street Journal states that the 2.9% contraction in US GDP marks the largest pullback seen in nearly five years, reinforcing doubts about the nation’s economic recovery. The data above and JEGI’s own market intelligence suggest that corporations and investors are vigorously exploring acquisition opportunities but remain cautious to “pull the trigger” on larger transactions as they wait for a clearer picture of the economy’s direction.
Large Transactions in 1H 2014
The first half of 2014 saw nine mega deals hitting the $1 billion+ mark, including the:
- Facebook acquisition of WhatsApp for $19 billion;
- CVC Capital Partners and Leonard Green & Partners acquisition of Advantage Sales & Marketing, a
- sales and marketing agency that specializes in growing brands in the consumer packaged goods industry, from Apax Partners for $4 billion;
- Priceline acquisition of restaurant reservation solutions provider OpenTable for $2.6 billion;
- Charterhouse Capital Partners acquisition of SkillSoft, a provider of on‐demand training and elearning solutions, for a reported $2.3 billion;
- Berkshire Partners acquisition of a majority stake in Catalina Marketing Corporation, a provider of consumer‐driven marketing solutions to brand manufacturers, retailers and health providers, in a deal valued at approximately $2 billion;
- Cox Enterprises acquisition of a 25% stake in AutoTrader Group, a digital automotive marketplace
- for car shoppers and sellers, for $1.8 billion;
- KKR acquisition of Internet Brands, operator of media and e‐commerce sites related to consumer purchases, from Hellman & Friedman for $1.1 billion;
- Hellman & Friedman acquisition of a majority stake in Renaissance Learning, a provider of computer‐based assessment technology and school improvement programs, for $1.1 billion; and
- Relativity Media acquisition of Fullscreen, a digital media company that builds next‐generation channels and networks on YouTube, for nearly $1 billion, according to several sources.
M&A Activity in Marketing Services & Technology
In recent years, the Marketing Services & Technology sector has dominated M&A activity, and the first half of 2014 was no different. With 307 transactions, the Marketing Services & Technology sector accounted for 41% of total deal volume. This sector had 37 more deals than the next three most active sectors combined – Healthcare Information & Technology (122 deals), B2C Online Media & Technology (83 deals), and Mobile Media & Technology (66 deals).
In 1H 2014, a majority of the Marketing Services & Technology transactions fell within the sub‐sectors of marketing technology (18%), digital agency (17%), data/analytics (11%), and traditional agency (9%). With the growing impact of technology on the marketing services space and increasing focus on the quality of data, we have seen a flurry of M&A transactions happening in the realm of marketing tech/automation and data/analytics.
Indeed, as of this writing, JEGI is closing a significant transaction between two digital marketing services players that will be announced shortly.
The Continued Importance of Mobile
M&A activity in Mobile Media & Technology has seen a continuous rise in both deal volume and deal value over the past several years. The growth in mobile transactions illustrates the dramatic shift to mobile consumption, as highlighted in the IDC and Flurry charts shown below.
Last month, JEGI advised the founders and majority shareholders of Distimo, the leading mobile app market intelligence and analytics provider, in its sale to competitor App Annie. The merger creates the global market leader in the mobile app analytics space, with the largest transaction data sets for the most publishers globally. Together, the companies will have nearly 600,000 apps relying on their analytics tools. The company is “positioned to win” across the mobile marketing intelligence continuum, providing deep data and analytics via numerous content channels, including books, music, and video.
While lackluster business confidence continues, we expect middle‐market M&A activity to remain slow through the next quarter and small deals to continue leading the market. However, there is a growing need for large and middle‐market companies to remain relevant within the marketing technology and mobile landscape, which we anticipate will propel larger M&A transactions in future quarters. The debt markets remain strong, which will also help fund acquisitions for both strategic and private equity players.
M&A Highlights for 1H 2014
Deal volume in the b2b online media and technology sector rose 29% in the first half of 2014, with 44 transactions, compared to 34 in 1H 2013. Deal value increased sharply, to $1.9 billion, driven by Walt Disney’s acquisition of Maker Studios for up to $950 million in Q1 2014. Notable transactions in the second quarter of 2014 included the: Axel Springer’s StepStone acquisition of digital recruitment group Jobsite from DMGT for $151 million; Vitruvian Partners acquisition of JacTravel, supplier of online hotel bookings and inbound travel services for the tourism sector, for $136 million; and Bankrate acquisition of Caring, senior care resource website, for $54 million.
Although b2c online media and technology was the third most active sector in deal volume in 1H 2014, with 83 transactions, volume declined 30% vs. 1H 2013’s 119 deals. Deal value, however, nearly doubled, to a total value of $7.6 billion, due to Cox Enterprises’ $1.8 billion acquisition of a 25% stake in AutoTrader Group in January; the $2.6 billion Priceline acquisition of OpenTable in June; and Relativity Media’s $1 billion acquisition of Fullscreen in May. Other notable deals in Q2 2014 included the Axel Springer acquisition of Israeli classifieds website Coral‐Tell Internet Services for approximately $230million, and Helen of Troy’s acquisition of Healthy Directions, health publisher and direct‐to‐consumer retailer of doctor‐formulated nutritional supplements and skincare products, for $195 million.
While deal volume in the business‐to‐business media sector remained flat, deal value increased more than 8x in the first half of 2014 vs. 1H 2013, up to $1.7 billion, with Apax Partners’ acquisition of a 50%stake in Trader Media for approximately $979 million in January, and the Wasserstein & Co. acquisition of ALM Media, provider of business news and information focusing on the legal and commercial real estate sectors, for $417 million. Another notable deal in Q2 2014 was the $240 million acquisition of Autodata Publishing Group, publisher of technical information for the automotive aftermarket, by Bowmark Capital.
The consumer magazines sector slowed this half with nine transactions, compared to 24 in 1H 2013, and deal value down 41%, to $166 million. Notable Q2 2014 deals included the BBC acquisition of the sports and crafts titles from Future for $40 million, and the Tinicum acquisition of F+W Media, a content and e‐commerce company serving enthusiast vertical markets through a diversified portfolio of media, e‐commerce sites, events, catalogs, etc., for an undisclosed sum. JEGI provided a fairness opinion to the special committee of the Board of Directors of F+W Media.
Deal volume in the database and information services sector was flat at 32 transactions in the first half of 2014 vs. 1H 2013, and deal value dropped slightly to $2.7 billion. Notable deals in the second quarter included the: Blackstone Group and Goldman Sachs acquisition of Ipreo, provider of market intelligence, deal execution platforms, and investor communication tools to investment banks and corporations, from KKR for $975 million; Wolters Kluwer acquisition of a majority stake in Third Coast Holdings, developer of enterprise legal management software and services, for $180 million; and Genstar Capital acquisition of B2B information and technology company Asset International for an estimated $125+ million, according to peHUB.
M&A activity in the education information, technology and training sector remained flat in both dealvolume and deal value in 1H 2014 vs. 1H 2013, with 43 transactions at $5 billion. Notable deals in Q2 2014 included the: acquisition by Insight Venture Partners and GIC Special Investments of iParadigms, developer of cloud‐based educational technologies for plagiarism prevention and content verification applications, from Warburg Pincus for $752 million; John Wiley & Sons acquisition of CrossKnowledge, a learning solutions provider focused on leadership and managerial skills development, for $175 million; and Weld North acquisition of human capital management software developer Truenorthlogic and language and literacy software developer Imagine Learning from Sorenson Capital for approximately $150 million.
The exhibitions and conferences sector was flat in terms of deal volume in the first half of 2014 vs. 1H2013, at 30 transactions. Deal value, however, dropped significantly, down to $291 million, because of the $950 million Onex acquisition of Nielsen Expositions in 2013 (JEGI advised Onex in this deal). Notable transactions for Q2 2014 included the: AUA Private Equity acquisition of Blue Star Media, an event, media and entertainment company that specializes in consumer expos, events and national touring shows and exhibits; UBM acquisition of Expo CIHAC, provider of tradeshows for construction materials, machinery, equipment, hand and power tools, etc.; and the Lanyon acquisition of Passkey International, provider of advanced group reservation technology for meetings, events and travel.
The healthcare information and technology sector, the second most active sector in terms of deal volume, increased by 17% in number of transactions in 1H 2014 vs. 1H 2013, up to 122 deals. Deal value in the sector rose 73%, to $7.2 billion. Notable deals this quarter included: Summit Partners’ acquisition of ABILITY Network, provider of a suite of Web‐based workflow solutions to manage the administrative complexities of healthcare for hospitals, for $550 million; WEX’s acquisition of Evolution1, provider of electronic payment, on premise, and cloud computing healthcare solutions, for $533 million; the IMS Health acquisition of the Cegedim Information Solutions and Customer Relationship Management (CRM) business for $523 million; and the $370 million acquisition of CDMI, a medical and pharmacy benefit management company, by Magellan Health.
The marketing services and technology sector continues to drive M&A activity, with 307 transactionsand $16.6 billion of value in 1H 2014. The two largest transactions of this quarter, also listed above, include the CVC Capital Partners and Leonard Green & Partners $4 billion acquisition of Advantage Sales & Marketing and KKR’s $1 billion acquisition of Internet Brands. Other notable deals in Q2 2014, which reflect the wide range of transactions and diverse buyer pool for this sector, included the:
- GTCR acquisition of Vocus, provider of marketing services and software to help clients engage prospects, nurture and convert customers, and measure marketing effectiveness, for $481 million,.
- National CineMedia acquisition of Screenvision Cinema Network, provider of cinema advertising, marketing and media solutions for advertisers, for $376 million.
- Acxiom acquisition of LiveRamp, an online platform for CRM retargeting and provider of data onboarding solutions to marketers, publishers and ad tech companies, for $310 million.
- HGGC acquisition of a majority stake in AutoAlert, provider of data analytics and lead generation solutions to the automotive dealership industry, for a total enterprise value near $300 million, according to The Wall Street Journal.
- IBM acquisition of Silverpop, provider of email marketing software and marketing automation solutions, for $270 million.
- SingTel subsidiary Amobee acquisition of Adconion Media, Inc. and Adconion Pty Limited, the North American and Australian businesses of online advertising network Adconion, for $229 million.
- Dunnhumby acquisition of demand side ad platform sociomantic labs for an estimated $175 million.
- Amobee acquisition of Kontera Technologies, a digital content intelligence and marketing technology company, for $150 million.
- Kantar Group acquisition of Precise Media Group, a business information group that monitors, analyzes and draws insight from news, opinions and conversations to help clients understand important trends, for approximately $117 million.
- AOL acquisition of Convertro, operator of a cross‐channel marketing optimization and media attribution engine, for $101 million.
The number of deals for the mobile media and technology sector declined by 20% in the first half of 2014, as compared to 1H 2013, down to 66 transactions. Deal value, however, climbed exponentially to $21.2 billion, due to the $19 billion Facebook/WhatsApp transaction in February. Notable Q2 2014 deals included the: Intuit acquisition of Check, a finance mobile app that allows customers to pay bills and track personal finances, for $360 million; Opera Software acquisition of AdColony, a video advertising network that develops mobile video platforms, for $350 million; and App Annie’s acquisition of mobile analytics company Distimo, as mentioned above (a JEGI transaction).