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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    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.”

    Monday
    Aug102015

    HEALTHCARE M&A VOLUME DRIVEN BY STRATEGIC ACQUIRERS

    According to Berkery Noyes’ Healthcare report for first half 2015, total deal volume increased 16 percent relative to second half 2014. Transactions completed by strategic acquirers rose from 138 to 163 deals, whereas those backed by financial sponsors improved from 52 to 57 deals. Aggregate value fell 43 percent, from $10.70 billion to $6.06 billion. However, value gained 24 percent on a year-over-year basis. Also of note, seven of the industry’s top ten largest deals last year occurred in second 2014.

    The peak for volume throughout the previous two-and-a-half years occurred in first half 2015 while value reached its zenith in second half 2014. In terms of valuations, the median revenue multiple over the past six months decreased from 3.0x to 2.7x, which remained slightly above its median throughout the last 30 months.

    Transaction volume in the Healthcare IT segment remained about constant, with a total of 101 deals. This represented a 29 percent increase compared to first half 2014 and was the segment’s highest point throughout the past two-and-a-half years. Moreover, there was a 16 percent rise in the number of strategic acquisitions in the Healthcare IT segment, from 69 in second half 2014 to 80 deals in first half 2015. Strategic acquirers accounted for 79 percent of Healthcare IT volume year-to-date.

    The Consumer Health segment saw a slight uptick, from 14 to 16 deals. Clothing manufacturer Under Armour was a notable Consumer Health acquirer with two mobile-based acquisitions in first half 2015 relating to digital health data, nutrition information, and fitness tracking. Along these lines, Under Armour acquired MyFitnessPal for $475 million and Endomondo for $85 million. These two transactions will build upon Under Armour’s previous acquisition of MapMyFitness for $150 million in 2013.

    “In the rapidly changing healthcare information/technology marketplace, both strategic and financial buyers are on the hunt for attractive acquisitions of scale,” said Tom O’Connor, Managing Director at Berkery Noyes. “Companies with good scale, recurring revenue, and high growth rates with a large addressable market opportunity, whether they are healthcare information/education/technology providers, revenue cycle management, point-of-care information solutions, or one of many other attractive niches, are in high demand from both private equity and strategic buyers.” 

    “The industry is undergoing a rapid transformation and structural shifts due to reform, cost pressures, shifting responsibilities between payors and providers, and in increased regulatory environment,” stated Jonathan Krieger, Managing Director at Berkery Noyes. “Private, best-of-breed technology-enable healthcare IT companies that effectively address market niches and have some level of scale are in high demand by both financial and strategic buyers.” 

    Monday
    Aug032015

    CAPITAL MARKETS TRANSACTION VOLUME REBOUNDS STRONGLY IN FIRST HALF 2015

    Berkery Noyes’ Financial Technology report for first half 2015 indicated that total transaction volume decreased seven. Aggregate deal value increased 17 percent, from $16.21 billion to $18.90 billion. When compared to first half 2014, volume rose 14 percent and value gained 63 percent. The peak for volume throughout the last 30 months occurred in second half 2014 while value reached its zenith in first half 2015.

    The median revenue multiple increased from 2.8x in second half 2014 to 4.5x in first half 2015. Of note, deals during the last two-and-a-half years with enterprise values above $160 million received a median revenue multiple of 4.5x and median EBITDA multiple of 16.2x, whereas those in the $10-$20 million range had a median revenue multiple of 1.7x and median EBITDA multiple of 9.0x.

    The segment with the largest increase in volume during first half 2015 was Capital Markets with a 31 percent rise, from 58 to 76 deals. Four of the top ten deals also occurred in the Capital Markets segment.

    Notable related transactions included SS&C Technologies’ acquisition of Advent Software, a provider of portfolio management software, for $2.6 billion; Playtech’s acquisition of Plus500, an online FOREX trading platform that serves retail customers, for $697 million; and BATS Global Markets’ acquisition of KCG Hotspot FX, a FOREX trading venue and electronic communication network, for $365 million.

    “An increased appetite for technology spending at financial institutions is presenting vendors with good pipelines and an increased array of legacy tech sellers,” stated Peter Ognibene, Managing Director at Berkery Noyes. “In addition, regulatory pressures are requiring more transparency pertaining to risk assessment and valuation methods.”

    The overall industry’s decrease in volume over the past six months was attributable in major part to a 41 percent decline in the Payments segment. This came in the aftermath of a 46 percent increase in second half 2014, which was the segment’s highest point over the past two-and-a-half years.

    “The payments sector had many license-and-maintenance legacy business models, which are good, but not always the most attractive to buyers,” said John Guzzo, Managing Director at Berkery Noyes. “Today, companies prefer subscription based business models. Moreover, as companies continue to pursue electronic bill payment and online payments to eliminate paper bills, the payments industry may see more mergers in that space in the future.”

    Thursday
    Jul232015

    INTERNET MEDIA VOLUME OUTPACES ALL OTHER INDUSTRY SECTORS IN FIRST HALF 2015

    Berkery Noyes’ Media and Marketing report for first half 2015 revealed that deal volume saw a three percent uptick on a half year basis, from 841 to 863 transactions. Total value fell 31 percent, from $52.72 billion to $36.48 billion.

    The highest value deal in first half 2015 was Verizon Communications’ acquisition of AOL for $4.13 billion in the Internet Media segment. Internet Media also had the largest half year increase in volume, rising 25 percent. Regarding specific Internet Media subsectors, there was a 36 percent rise in the online classifieds marketplace, from 47 to 64 acquisitions. One of the largest related deals thus far in 2015 was CoStar Group’s acquisition of Apartment Finder for $170 million.

    Marketing transaction volume underwent a four percent increase in first half 2015. In addition, deals in the digital marketing subsector represented 45 percent of the segment’s overall activity in first half 2015.

    Japanese advertising company Dentsu was the overall industry’s most active acquirer with nine transactions year-to-date. High profile Marketing deals in first half 2015 included GTCR and Adams Outdoor Advertising’s acquisition of Fairway Outdoor Advertising for $575 million; Red Ventures’ acquisition of Pitney Bowes’ marketing services business, Imagitas, for $310 million; and Solera Holdings’ acquisition of DMEautomotive, a provider of marketing solutions for the retail automotive industry, for $143 million.

    Deal activity in the Exhibitions, Conferences, and Seminars segment saw a twelve percent improvement, from 43 to 48 transactions. Also of note, private equity backed deals in the segment nearly quintupled between second half 2014 and first half 2015, from four to 19 acquisitions. The segment’s largest transaction in first half 2015 was the acquisition of Cirque du Soleil by an investor group led by TPG Capital for $1.2 billion.

    “Many media and marketing companies are looking for acquisitions to enhance their growth,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “They are also making investments in those areas where their clients are spending the most money and where they can sell their services at a premium. M&A activity is robust due to the high stock market valuations and the low cost of financing transactions.”