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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    Tuesday
    Oct132015

    B2B PUBLISHING AND INFORMATION DEAL VOLUME SHOWS SIGNS OF STRENGTH

    Deal volume in Berkery Noyes’ Media and Marketing report for third quarter 2015 declined six percent between second and third quarter 2015. However, the number of transactions year-to-date increased four percent compared to the corresponding timeframe in 2014. Aggregate value rose 15 percent on a quarterly basis, from $20.8 billion to $24.0 billion.

    The B2B Publishing and Information segment experienced a 38 percent improvement on a quarter-to-quarter basis, from 39 to 54 deals. Strategic acquirers were responsible for 85 percent of the segment’s volume year-to-date, as opposed to 72 percent of volume throughout the first three quarters of 2014. The largest B2B deal in third quarter 2015 was McGraw Hill Financial’s acquisition of SNL Financial, a news, data, and analysis provider, for $2.2 billion. 

    M&A volume in the Consumer Publishing segment stayed about the same with 30 transactions. The largest Consumer Publishing deal in third quarter 2015 and year-to-date was Japanese media group Nikkei’s announced acquisition of The Financial Times from Pearson for $1.3 billion. Pearson has completed several recent divestitures as it looks to focus on its global education business.

    M&A activity in the Marketing segment decreased eight percent during the third quarter. This followed a 14 percent rise from first to second quarter 2015. The highest value Marketing deal in the third quarter was comScore’s announced acquisition of Rentrak Corporation, a cross-platform media measurement firm, for $827 million. Rentrak will be merged with comScore and serve as a competitor to current leaders in the analytics and media tracking space such as Nielsen.

    Meanwhile, WPP was the overall industry’s most active acquirer year-to-date with 20 transactions, 12 of which of occurred in the third quarter. The largest of these deals was WPP Group and Providence Equity Partners’ announced acquisition of Chime Communications for $550 million. Chime Communications provides public relations, advertising, sports marketing, market research, direct marketing, and design and event management consultancy services.

    Another notable Marketing transaction during the quarter was Sony Pictures Television’s acquisition of a majority stake in IMS Internet Media Services, an ad sales and media buying firm focused on the Latin American market, for $100 million. In terms of specific subsectors, digital marketing deals accounted for 46 percent of the segment’s volume in the third quarter, a ratio that was consistent with the previous two quarters. “Deal flow in the digital marketing subsector has remained strong throughout the year,” said Vineet Asthana, Managing Director at Berkery Noyes. “The vast majority, more than 90 percent, have been completed by strategic acquirers. They are looking to supplement their organic growth, and without the pressure to exit their investments, are often focused on the long-term value of obtaining new products and services.”

    Wednesday
    Oct072015

    SOFTWARE M&A VALUE INCREASES FOR THE THIRD CONSECUTIVE QUARTER

    According to Berkery Noyes' Software report for third quarter 2015, volume underwent a slight uptick over the prior quarter, from 502 to 507 deals. The number of transactions year-to-date increased six percent compared to the corresponding timeframe in 2014. Aggregate value rose 24 percent relative to the previous quarter, from $33.8 billion to $41.7 billion. Of note, four of the highest value software transactions year-to-date occurred in the third quarter, three of which were backed by financial sponsors.

    The industry’s largest strategic transaction in third quarter 2015 was the announced acquisition of HERE, a digital mapping and location intelligence business, by car manufacturers BMW Group, Audi Group and Mercedes-Benz for $3.1 billion. HERE was created by Nokia’s $8.1 billion acquisition of Navteq back in 2008. In addition to HERE, there have been several other recent transactions focused on mapping technology such as Apple’s acquisition of Mapsense, a visualization startup, in the third quarter; and Uber’s acquisition of Microsoft’s Bing mapping unit in the second quarter.

    In terms of “Niche Software,” which is targeted to specific vertical industries, volume improved 13 percent on a quarterly basis. Deal flow in the Consumer Software segment decreased nearly one-third over the past three months. The Business Software segment, which consists of software designed for general business practices and not specific vertical industries, saw volume rise five percent.

    Deal volume in the Infrastructure segment experienced a 21 percent quarterly decline. This followed a 29 percent increase between first and second quarter 2015. Regarding high profile acquirers in the third quarter, Microsoft completed a deal in the cyber-security subsector with the acquisition of Adallom, a startup that monitors the use of cloud-based services, for $320 million. This followed Microsoft’s acquisition of security software developer Aorato in 2014 for a reported $200 million. 

    Another notable cyber-security deal during the quarter was Splunk’s acquisition of Caspida, a threat detection company, for $190 million. There were also several deals in the quarter completed by notable acquirers relating to the Internet of Things (IoT), such as IBM’s acquisition of StrongLoop and Autodesk’s acquisition of SeeControl.

    “Threats, intrusions, spam, phishing and other malicious elements show no sign of diminishing,” said James Berkery, Chief Information Officer at Berkery Noyes. “This is leading some vendors to amass a war chest of security assets through M&A.” Berkery continued, “Many organizations are also looking to mitigate information risk by shoring up authorization and authentication capabilities. This includes portal implementations through a unified single sign-on; consolidating information through more effective content management; and applying better analytics to various business processes. Moreover, those in certain vertical markets such as life sciences and financial services must address regulatory concerns as well as ongoing threats of litigation, legal discovery costs and privacy issues. Each of these factors may help spur acquisition activity going forward.”

    Wednesday
    Sep022015

    PRIVATE EQUITY VOLUME REACHES ITS HIGHEST LEVEL OVER THE PAST TWO-AND-A-HALF YEARS

    Berkery Noyes’ Private Equity report for first half 2015 indicated that deal volume increased 12 percent on a half-to-half year basis. Total value rose from $23.49 billion to $24.99 billion, a six percent gain. The peak for private equity volume during the past two-and-a-half years occurred in first half 2015, whereas value reached its zenith in first half 2014. 

    The Information Industry’s most active financial sponsor in first half 2015 was Vista Equity Partners with 12 transactions. Based on publicly disclosed values, the largest of these deals was Vista’s acquisition of Powerschool, a web-based K-12 student information system, for $350 million. Meanwhile, Marlin Equity Partners was another active private equity firm in the Software market with eight transactions year-to-date.

    Marlin's acquisitions consisted of Resolution1Security and Fidelis Cybersecurity Solutions in the cyber-security subsector; e-MDs and HomecareCRM in the Healthcare IT sector; International Business Systems in the enterprise resource planning and supply chain subsectors; Arcplan, a business intelligence and corporate performance management company; Asentinel, a telecom expense management firm; and barometerIT, a provider of IT portfolio analysis solutions.

    In terms of specific verticals, private equity volume in the Education market rose 38 percent in first half 2015, from 37 to 51 deals. Providence Equity Partners and The Riverside Company were the industry’s most active Education acquirers with three transactions each in the space year-to-date, which includes those either purchased directly or through an affiliated business. 

    Riverside acquired Health and Safety Institute, an emergency care and response training organization; C-Learning, an e-learning course developer; and Digital Ignite, a continuing education and social learning platform. Providence Equity acquired Remote-Learner UK, which provides hosting, support, consulting services to the education industry; Schoolwires, an educational website, hosting and content management provider to K-12 schools; and Endeavour College of Natural Health, a vocational training institution in the health and wellness sector. 

    “Strong balance sheets, less restrictive lending, and more plentiful private sellers are fueling deal activity,” said James Berkery, Chief Information Officer at Berkery Noyes. “Valuations have also been robust over the past few years, especially as financial sponsors compete with strategic acquires for companies that have attractive components such as recurring revenue models, high margins, continuous growth, diversified customer concentration, and proprietary technology in markets with a barrier to entry.”

    Monday
    Aug242015

    DEAL VOLUME RISES WHILE VALUE STAYS NEARLY CONSTANT IN THE INFORMATION INDUSTRY

    Berkery Noyes’ Information report for first half 2015 revealed that total transaction volume rose five percent since second half 2014. Aggregate value was nearly flat at $112.63 billion. Of note, the peak for volume throughout the past two-and-a-half years occurred in first half 2015, whereas value reached its zenith in first half 2014.

    In terms of valuations, the median revenue and median EBITDA multiple over the past six months remained about constant at 2.3x and 11.6x, respectively. The industry’s largest transaction in first half 2015 was Permira and CPP Investment Board’s acquisition of Informatica, a provider of enterprise data integration software and services, for $4.77 billion.

    Regarding the three horizontal markets covered in the report, the number of transactions in the Software horizontal experienced a three percent uptick. As for software used within specific vertical industries or “Niche Software,” volume increased 11 percent. Four of the horizontal’s top ten highest value deals year-to-date were located in the Niche segment. Two of these four acquisitions took place in the Capital Markets sector.

    In the Online & Mobile horizontal market, transaction volume improved 12 over the last three months. The SaaS & Cloud segment underwent a 16 percent rise in volume, which was the most active period for SaaS & Cloud on a half year basis throughout the past two-and-a-half years. M&A volume in the consumer application subsector increased 12 percent, from 119 to 133 transactions.

    Deal flow in the overall Media and Marketing horizontal increased two percent over the past six months. Internet Media volume also saw a 25 percent rise, from 208 to 259 deals.

    In addition to Verizon Communication’s acquisition of AOL, notable segment deals during first half 2015 included Houghton Mifflin’s acquisition of Scholastic Corporation’s Education and Technology Services business for $575 million; CoStar Group’s acquisition of Apartment Finder, a rental listing marketplace, for $170 million; and Facebook’s acquisition of TheFind, a personalized shopping engine, as the social network looks to bolster its digital advertising business.

    “Drawn by strong valuations, once reticent sellers are showing increased receptivity to good offers,” said James Berkery, Chief Information Officer at Berkery Noyes. “Acquirers are motivated by the need to find new growth avenues and are mindful of those nimble, entrepreneurial upstarts nibbling at the edges of their markets.” Berkery continued, “Meanwhile, companies of every stripe are finding ways to package content with the tools and technology that make it easier to access, manipulate, analyze, and distribute information. Most of those who succeed in the solutions business, as the content-plus-tools convergence is often called, do so by acquiring, rather than building, the components they do not own.”

    Monday
    Aug172015

    EDUCATION DEAL ACTIVITY EXPERIENCES STRONG GROWTH IN K-12 MEDIA AND TECH

    Berkery Noyes’ Education report for first half 2015 showed that total transaction volume improved nine percent on a half year basis. In addition, private equity volume rose 38 percent, with a total of 51 transactions in first half 2015. Aggregate value increased 29 percent, from $4.75 billion to $6.11 billion. The peak for volume over the previous five half year periods occurred in first half 2015 whereas value reached its zenith in first half 2014.

    As for overall value, nine of the top ten deals thus far in 2015 were completed by strategic acquirers. The industry’s largest transaction year-to-date was LinkedIn Corporation’s acquisition of Lynda.com, an online learning company that provides video tutorials and courses covering business, software, creative, and other areas, for $1.5 billion. This deal represented slightly more than one-fifth of the industry’s total value in first half 2015. 

    Deal volume in the K-12 Media and Tech segment increased 39 percent in first half 2015. Notable transactions included Houghton Mifflin’s acquisition of Scholastic Corporation’s Education and Technology Services business for $575 million; Pearson’s sale of Powerschool, a web-based K-12 student information system, to Vista Equity Partners for $350 million; Pearson’s sale of Family Education Network, a global leader in the consumer informal learning space, which owns one of the largest integrated digital audiences of kids, parents, and teachers in the world, to Sandbox Partners; Data Recognition Corporation’s acquisition of McGraw-Hill Education’s CTB assessment assets; and Blackboard’s acquisition of Schoolwires, an educational website, hosting, and content management provider to K-12 schools.

    “The large strategic players in the sector are the diversified education companies who are steadily moving away from print and becoming more heavily focused on digital and services,” said Peter Yoon, Managing Director at Berkery Noyes. “Companies like Houghton Mifflin continue to acquire as evidenced by their recent purchase of Scholastic’s Edtech division, and McGraw-Hill and Pearson continue to do the same in order to become less dependent on print revenues.” 

    Yoon continued, “Private equity firms are increasingly being drawn to the education and training sector, given the sheer scale of the market, the favorable lending environment, and the increasing number of companies that are growing with subscription based revenue models in the space. Part of the role that PE firms play in the sector is to create and grow companies of scale, which the strategic players often see as attractive acquisition opportunities due to the larger size. The influx of PE capital creates an environment which actually allows acquisitions by strategics to be more prevalent and impactful to the organization.”