JEGI Q1 2014 M&A Overview: Q1 2014 Deal Value Rises Sharply as Mega Deals Return
New York, NY April 1, 2014 – The media, information, marketing and technology sectors saw 374 transactions announced in the first quarter of 2014, at a total value of $41 billion. Deal volume increased by 6% over a slack first quarter of 2013, after the 2012 year-end surge ahead of expected tax changes. Meanwhile, deal value took an exponential leap from $7.5 billion in Q1 2013, on the strength of Facebook’s $19 billion acquisition of mobile messaging application WhatsApp and several other large transactions. In Q1 2014, transactions with $500+ million price tags accounted for 81% of total announced deal value, 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.
M&A Activity by Deal Value
As shown in the chart below, large $500+ million M&A transactions dominated the first quarter of 2014, with limited M&A in the middle market of transactions ranging between $50 and $500 million. During the downturn in 2009, middle-market M&A was also weak, accounting for 21% of deal value. 2010 and 2011 saw increases, with middle-market activity reaching 40% of deal value in 2011, coupled with a dearth of mega deals. 2012, 2013 and the first quarter of 2014 have seen a swing back to major transactions, with middle-market deals down to 12% of total deal value for the latest quarter.
The first quarter of 2013 saw only one transaction above the $500 million threshold, Expedia’s acquisition of a 61% stake in Trivago, a hotel search web site, for approximately $625 million. The first quarter of 2014, however, saw 15 deals with a value over $500 million, including the:
- Facebook acquisition of WhatsApp for $19 billion, as mentioned above;
- Charterhouse Capital Partners acquisition of SkillSoft, a provider of on-demand training and e-learning 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;
- 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;
- Apax Partners acquisition of a 50% stake in Trader Media, a multimedia group with automotive magazines, websites and classified ads, for approximately $979 million;
- Walt Disney Company acquisition of Maker Studios, a media company that enables artists to create, distribute and monetize original content on YouTube, for $950 million;
- Thoma Bravo acquisition of TravelCLICK, a provider of cloud-based revenue-generating solutions for hoteliers worldwide, for $930 million;
- Convergys acquisition of Stream Global Services, a provider of business process outsourcing services, for $820 million;
- Dassault Systemes acquisition of Accelrys, a developer of scientific business intelligence software and solutions, for $683 billion;
- GTCR acquisition of Callcredit Information Group, a provider of consumer marketing data products and services, for $586 million;
- Matthews International Corporation acquisition of Schawk, a provider of brand development, graphic services, digital promotion and advertising, etc. to consumer packaged goods, retail and life sciences clients, for $585 million;
- CoStar Group acquisition of Apartments.com, a provider of rental property listings in the U.S., for $585 million;
- Zynga acquisition of NaturalMotion, a creator of mobile videogames and animation technology, for $527 million; and
- Verint Systems acquisition of KANA Software, a developer of custom relationship software solutions, for $514 million.
Marketing Services & Technology M&A Activity
The Marketing Services & Technology sector was very active this quarter, accounting for 41% of all deal volume. A majority of sector transactions fell within the digital and traditional agency, marketing technology and data/analytics sub-sectors.
Marketing technology accounted for 30% of deal value within the Marketing Services & Technology sector, including Thoma Bravo’s $930 million acquisition of TravelCLICK, Verint Systems’ $514 million acquisition of KANA Software; and Oracle’s reported $400 million acquisition of BlueKai, a cloud-based big data platform that enables companies to personalize online, offline and mobile campaigns with actionable information about targeted audiences.
Shopper marketing was also active, accounting for 26% of sector deal value, almost entirely due to Berkshire Partners’ acquisition of a majority stake in Catalina Marketing Corporation, reported at approximately $2 billion.
Rising business confidence and the continuing strength of the debt market give us confidence that M&A activity will strengthen in 2014 across these sectors, as potential sellers process these signals that now is a very good time to consider going to market.
Ray Shu, Managing Director & Media Team Leader at GE Capital shared this view at JEGI’s 10th Annual Media & Technology Conference in mid-January, noting, “We expect a very robust debt market in 2014. We anticipate an improving economy, and a lot of companies have improved their margins, after all the cost-cutting during the downturn. We really do expect M&A activity to come back.”
JEGI especially expects to see M&A activity continue at a high volume in the digital marketing and technology sectors, as several trends further spur buyers, including:
- non-tech companies buying tech start-ups, to enhance overall marketing skills, analytics and ecommerce capabilities;
- acqui-hires, to bring on board the topflight talent of younger, smaller companies and stay ahead of the technology curve;
- the continued rise of mobile advertising and its forecasted 58% CAGR from 2011 to 2017;
- building out the marketing “stack”, to better manage and measure ongoing interactions with customers; and
- consulting firms becoming marketing services firms, acquiring/adding talent to offer clients expanded services and keep more revenue in-house.
Here at JEGI, we’re working hard to make this another banner year. Our latest closing was the sale of Women’s Marketing Inc., a portfolio company of Halyard Capital and Steelpoint Capital and the leader in media strategy, planning and buying for emerging brands targeting women, to PNC Riverarch Capital in February. We have a full pipeline of active deals, and as always, we are deep in conversations with a number of companies and private equity firms about their M&A strategies and go-to-market plans.
M&A Highlights for Q1 2014
The b2b online media and technology sector had 19 transactions in the first quarter of 2014, as compared to 21 in Q1 2013. Deal value, however, rose sharply for the quarter, to $1.4 billion, driven by Walt Disney’s acquisition of Maker Studios for $950 million. Other notable 2014 transactions included: Permira Advisers’ acquisition of a controlling stake in LegalZoom, a provider of personalized online legal solutions for families and small businesses, for more than $200 million; TiVo’s acquisition of Digitalsmiths, a developer of video search and recommendation solutions, for $135 million; and Rovi Corporation’s acquisition of Veveo, a provider of personalized search and discovery solutions for TV providers, mobile device manufacturers and mobile operators, for approximately $69 million.
Although b2c online media and technology was the third most active sector in deal volume in Q1 2014, with 44 transactions, volume declined 17% vs. Q1 2013’s 53 deals. Deal value, however, more than doubled, to a total value of $3.1 billion. Notable deals in Q1 2014 included: Cox Enterprises’ acquisition of a 25% stake in AutoTrader Group for $1.8 billion; CoStar Group’s acquisition of Apartments.com for $585 million; Verizon Communications’ acquisition of Intel Media, a provider of streaming TV services, for a reported $200 million; and LinkedIn’s acquisition of Bright Media, an online job search portal, for approximately $121 million.
M&A activity for the business-to-business media sector spiked in both deal volume and deal value; deal volume rose 50%, to 12 transactions, while deal value rose almost 10x, up to $1.0 billion, due to Apax Partners’ acquisition of a 50% stake in Trader Media for approximately $979 million. Other notable deals in 2014 included: Salem Communications’ acquisition of a suite of b2b publishing assets, Eagle Publishing, Eagle Financial Publications and Eagle Wellness, for $17 million; Owner Resource Group’s acquisition of Advantage Business Media, a portfolio of magazines, websites, e-newsletters and conferences, for an undisclosed sum; and Northstar Travel Media’s acquisition of b2b assets in the travel industry, Travel Weekly China, Travel Weekly Asia and Events China, for an undisclosed sum.
The consumer magazines sector slowed this quarter, decreasing from 11 transactions to 4, compared to the first quarter of 2013, and deal value declined 68%, to $59 million. Notable 2014 deals included: F+W Media’s acquisition of New Track Media, an enthusiast publisher in the crafts, woodworking and astronomy markets; Biglari Holdings’ acquisition of men’s lifestyle magazine Maxim; Metropolitan Media’s acquisition of lifestyle magazine 7×7; and Onnit Labs’ acquisition of My Mad Methods, a publisher of fitness training magazines.
The database and information services sector saw an increase in deals announced and deal value, up 25% and 126%, respectively, in the first quarter of 2014 vs. Q1 2013. Notable deals this quarter included: GTCR’s acquisition of Callcredit Information Group for $586 million; Vestar Capital Partners’ acquisition of Institutional Shareholder Services, a provider of proxy research services, for $364 million; and Fitch Group’s acquisition of Business Monitor International, a provider of news analysis, data, forecasts and other industry research, for an undisclosed sum.
The number of deals in the education information, technology and training sector remained relatively flat; however, deal value increased exponentially, up to $3.7 billion, due to Charterhouse Capital Partners’ acquisition of SkillSoft for a reported $2.3 billion, and Hellman & Friedman’s $1.1 billion acquisition of a majority stake in Renaissance Learning. Other notable deals in 2014 included Corporate Executive Board’s acquisition of Knowledge Advisors, a provider of learning and talent measurement solutions, for $52 million, and McGraw-Hill Education’s acquisition of Engrade, an online platform that unifies people, tools, data and curriculum in schools, for a reported $50 million.
The exhibitions and conferences sector saw a slight increase in the number of transactions, up 19% to 19 deals for the quarter. Deal value remained relatively flat with $162 million for Q1. Notable transactions for 2014 included: Live Nation’s acquisition of a 50% stake in the music festival producer Insomniac, for a reported $50 million; Reed Exhibitions’ acquisition of Capsule, the global trade fair for contemporary apparel and accessories, for an undisclosed amount; and Reed Exhibitions’ acquisition of two leading Mexican shows, Expo Beauty Show and Expo Lighting America Show, for an undisclosed amount.
The healthcare information and technology sector remained flat at 52 transactions in Q1 2014 vs. Q1 2013, as the second most active sector in terms of deal volume. Deal value in the sector rose 71% to $2.7 billion, led by Dassault Systemes’ acquisition of Accelrys for $683 billion. Other notable deals this quarter included: Ashfield Healthcare’s acquisition of KnowledgePoint360, a provider of healthcare information and communications solutions, for $144 million; Stryker Corporation’s acquisition of Patient Safety Technologies, a provider of services in the medical patient safety markets, for $108 million; and Intel Corporation’s acquisition of wearable device developer Basis Science, for a reported $100 million.
The marketing services and technology sector continues to drive M&A activity, with 154 transactions and $7.7 billion of value in Q1 2014. Many notable transactions are listed above, including Berkshire Partners’ acquisition of Catalina Marketing Corporation, Thoma Bravo’s acquisition of TravelCLICK, Convergys’ acquisition of Stream Global Services, Matthews International’s acquisition of Schawk, Verint Systems’ acquisition of KANA Software, and Oracle’s acquisition of BlueKai. Other notable deals in Q1 2014 reflect the wide range of transactions and diverse buyer pool for this sector:
- Comcast’s acquisition of FreeWheel, a provider of online video advertising solutions for global media companies, for a reported $360 million;
- Lithium Technologies’ acquisition of Klout, a social influence measurement company, for a reported $200 million;
- GTCR’s acquisition of Cision, a provider of cloud-based PR software, services and tools, for approximately $156 million;
- Microsoft’s acquisition of Parature, a provider of SaaS-based social and customer engagement software, for a reported $100 million;
- Ives’ acquisition of digital marketing agency Realise for approximately $67 million;
- Broadridge Financial Solutions’ acquisition of Emerald Connect, a provider of marketing services for the financial services industry, for $60 million;
- PNC Riverarch Capital’s acquisition of Women’s Marketing Inc., the leader in media strategy, planning and buying for emerging brands targeting women, for an undisclosed sum (a JEGI transaction);
- Dell’s acquisition of StatSoft, a provider of advanced analytics solutions for data mining, predictive analytics and data visualization, for an undisclosed sum; and
- Glencoe Capital’s acquisition of Dialogue Marketing, a provider of business outsourcing and customer engagement services, for an undisclosed sum.
The number of deals for the mobile media and technology sector declined by 20% in the first quarter of 2014, as compared to Q1 2013, down to 33 transactions. Deal value, however, climbed dramatically to $20.1 billion, due to the $19 billion Facebook/WhatsApp and $527 million Zynga/NaturalMotion acquisitions. Other notable 2014 deals included: Spotify’s acquisition of Echo Nest, a mobile music intelligence platform, for a reported $100 million; Yahoo’s acquisition of Aviate, a provider of contextual app search and organization mobile solutions, for a reported $80 million; and Flipboard’s acquisition of Zite, a mobile magazine app for the iPad, for a reported $60 million.