Independent Investment Banking for Media, Information, Marketing Services & Technology
PE Investors See Robust M&A Activity Ahead
In This Issue... PE Investors See Robust M&A Activity Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Jordan, Edmiston Group, Inc. (JEGI) offered a select group of private equity executives that invest in the media, information, marketing services and technology sectors the opportunity to provide their keen insights on the current state of their funds’ investment activities and their outlook on the market:
Active M&A Market Continues, Led by Marketing & Interactive Services . . . . . . .1 Digital M&A at the Event Horizon . . . . . .4 SIIA Strategic & Financial Investment Conference . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Exceptional Transaction Experience . . . .8
1. What key market forces will impact your investment activities into 2013? How active do you anticipate being in M&A over the next 12-18 months?
JEGI hosted its first Emerging Company Dinner of 2012 on May 17th at the 21 Club in New York City.
2. In which market sectors within media, information, marketing services and technology are you looking to invest and why? 3. What is your view of the debt market today and over the next 6-9 months? How is it affecting transactions and multiples? For your transactions, what is your optimal mix of equity, senior and mezzanine debt?
(From left) Lance Maerov, SVP, Corporate Development, WPP; Wilma Jordan, CEO, JEGI; Tolman Geffs, Co-President, JEGI; Matthew Egol, Partner, Media & Entertainment, Booz & Co.; and Randall Rothenberg, President & CEO, IAB
Here are their responses: Andy Davis, Managing Director BV Investment Partners email@example.com www.bvlp.com
(From left) Brian Keil, VP, Strategy & Business Development, Arbitron; Henrique De Castro, President, Global Media, Mobile & Platforms, Google; and Kurt Abrahamson, CEO, ShareThis
We anticipate M&A activity to be quite robust over the next 12-18 months. This year, BV is on track to have 6-8 realizations, mostly to strategic acquirers. We continue to find high growth, attractive companies in information services and communications, as these areas are growing much faster than the economy, due to long-term secular growth trends.
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$60 ($ billions)
500 400 $31.7
300 200 100
0 1h 2005
1h 2006 value
source: jegi transaction database
Despite dramatic improvement since 2008, debt markets are still very discriminating; we expect the debt markets to remain open to credit worthy buyers. We focus on creating value through growing earnings, so don’t typically try to maximize the leverage on our deals. We keep the balance sheets of our portfolio companies relatively simple. Walter Florence, Managing Director Frontenac Company firstname.lastname@example.org www.frontenac.com
In the past two years, Frontenac has bought six new platform companies and has sold seven portfolio companies, and we see that momentum continuing into 2012. As a firm, we are still focused on investing behind strong management teams that see an opportunity to build a market leading company; we call it “CEO1st” investing. We have also been uniquely focused on the family and founderowned business market, with over 220 such transactions completed. If the economy continues to slowly strengthen, or even holds, deal flow should continue to grow, with the help of strong debt markets. (continued on page 6)
Active M&A Market Continues, Led by Marketing & Interactive Services
First Half M&A Transactions and Value $70
Over the past decade, the firm has primarily invested in high growth, mission critical, information services companies. BV takes a thesis-driven approach to investing in higherthan-average growth segments of the economy, within the information sector.
Mergers and acquisitions in the media, information, marketing services and technology sectors continued at a fast clip in the first half of 2012, as the number of deals rose 52% over 2011 levels. Announced transaction value increased 49% to nearly $32 billion, primarily due to a few multi-billion dollar transactions, with the balance of market activity centered around mid-sized transactions. Overall, acquirers have been focusing on smaller, complementary acquisitions, with nearly 95% of transactions in 1H 2012 at values of less than $100 million. Only five deals exceeded $1 billion in value, including Alibaba Group’s pending acquisition of 20% of its shares from Yahoo for $7.1 billion, and the $3.3 billion buy-out of TransUnion by Advent International and Goldman Sachs. (continued on page 2)
Active M&A Market Continues, Led by Marketing & Interactive Services (cont. from p. 1) The majority of the deal activity in the first half of 2012 took place across the interactive, marketing services and technology markets. B2B and B2C Online Media & Technology, Marketing & Interactive Services, and Mobile Media & Technology accounted for 79% of total deals and 75% of deal value for the period.
lion in 2012 and representing a CAGR of -ARKETING )NTERACTIVE 3ERVICES 43%. There is a secular evolution at hand, -! BY 3UB 3ECTOR and marketing dollars continue to rapidly follow consumers. Media consumption *ANUARY *UNE continues to shift to the Internet, and now 3UB 3ECTORS .O OF 6ALUE 4OTAL $EALS MILLIONS 6ALUE to mobile, moving away from traditional !D !GENCY media. On average, consumers are spend!D .ETWORKS ing 26% of their media time online and !D 4ECHNOLOGY Marketing & Interactive Services 10% of their media time with mobile, $ATA !NALYTICS $IGITAL !GENCY There are clashing forces in the marketplace. according to Kleiner Perkins partner Mary % MAIL -ARKETING On the one hand, there is the uncertainty cre- Meekerâ€™s annual overview of Internet -ARKET 2ESEARCH#ONSULTING trends. Digital ad spending has started to ated by such factors as historically high unem-ARKETING 4ECHNOLOGY ployment rates and low consumer confidence, catch-up with time spent online, with -OBILE -ARKETING 22% of ad dollars flowing to the web. the Eurozone challenges in Greece, Spain and -ONITORING )NTELLIGENCE elsewhere, as well as poorly performing bell- However, the gap is still significant with 02 !GENCY 3EARCH -ARKETING wether stocks and post-IPO hangover (e.g., mobile, as it captures only 1% of ad dol3OCIAL -EDIA -ARKETING Zynga, Facebook, etc.). At the same time, lars. According to Meeker, closing the gap /THER between share of time spent online/on unprecedented waves of change and innovation 4OTAL mobile and share of advertising dollars are creating new opportunities in the market. SOURCE JEGI TRANSACTION DATABASE The explosive growth of social media â€“ the spent online/on mobile represents a $20 â€œSocialization of Everythingâ€? â€“ is transforming billion annual advertising opportunity in whole industries, such as entertainment, news, the US and points to the continuing move- Large technology companies, such as IBM, e-commerce, and gaming. Large brands are ment of ad dollars to digital media in the years Oracle, Adobe and others, are also aggressively investing in marketing technology solutions to quickly trying to adapt and are shifting dollars ahead. to interactive media and below the line market- As a result, companies are investing in market- help marketers create value from their data and ing (i.e., customer-centric communications, ing services to better assist their customers and provide customers with key business intellitypically with measurable results). As a result, capture more revenue. Advertising agencies gence and analytics, to drive better customer Internet advertising spending for Q1 2012 set and marketing services companies are retooling experiences and enhance customer engagea new record at $8.4 billion, according to the their business models by investing in integrat- ment. Oracleâ€™s $300 million acquisition of Interactive Advertising Bureau (IAB). â€œMore ed and interactive marketing solutions, such as Vitrue, which enables companies to manage online consumers than ever are taking to the Experianâ€™s acquisition of Conversen, a pioneer their presence on social networks, clearly highInternet to inform and navigate their daily lives in developing interaction management tech- lights this point. These trends have made â€“ by desktop, tablet or smartphone,â€? said nologies, enabling cross-channel conversations Marketing & Interactive Services by far the Randall Rothenberg, President and CEO, IAB. (JEGI represented Conversen in this deal). most active sector for M&A, accounting for â€œMarketers and agencies are clearly â€“ and wise- According to Doug Bacon, Director, Corporate 40% of all transactions and 27% of total value ly â€“ investing dollars to reach digitally connect- Development, Experian, â€œWe see Conversen as in 1H 2012. ed consumers.â€? a bridge between our digital and traditional Areas of Focus for Marketing & Interactive At the same time, mobile is exploding. offerings. The concept of consistent messaging Services M&A In the first half of 2012, the ad Smartphone sales have surpassed PC sales, and, to the consumer, regardless of channel, is criti- agency and digital agency sub-sectors were the according to StatCounter, mobile traffic cal to marketing success. This acquisition most active within Marketing & Interactive accounted for 10% of Internet traffic in May becomes the glue that puts it all together and Services, accounting for a combined 34% of 2012 vs. less than 1% in December 2009. provides us with a platform to tie together our deal volume and 26% of deal value. Marketing According to eMarketer, mobile ad spend will market leading products into a single point of technology and market research/consulting were the next most active sub-sectors, each reach $10.8 billion in 2016, up from $2.6 bil- entry for our clients.â€? accounting for 16% and 15%, respectively, of deal volume for the half year. Other active sub4OP -ARKETING )NTERACTIVE 3ERVICES 4RANSACTIONS H sectors for M&A included data & analytics (17 deals), PR agency (12 deals), ad technology (13 $ATE "UYER 3ELLER "RIEF $ESCRIPTION 6ALUE MILLIONS deals), and monitoring & intelligence (11 deals). 3OCIAL NETWORKING PORTALS FOR -ICROSOFT
ENTERPRISES -ANAGE APPS ADS AND PAGES ON SOCIAL MEDIA PLATFORMS
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(EALTH OUTCOMES RESEARCH SERVICES
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-OBILE ADVERTISING SOLUTIONS
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