Monday, February 13, 2017

The State of Venture Capital in 2017


USA February 2 2017
After three years of strong growth, venture capital financing activity slowed noticeably in 2016. According to data published by Pitchbook and the National Venture Capital Association, companies raised $69.1 Billion in 2016 from angels and institutional investors in 8,136 deals. While these numbers beat the industry average for the past 10 years, they are well below the lofty heights reached in 2015, when companies raised $79.3 Billion in 10,468 deals. The decline in dealmaking cut across all stages and nearly all industry sectors, but it was particularly acute for early-stage startups. The number of companies receiving their first VC equity investment (typically a “Series A” financing) in FY 2016 was down nearly 30% from 2015, and has now fallen for six consecutive quarters. The amount raised in those transactions fell to its lowest level since 2013.

Although the overall numbers indicate that investors are pulling back, the devil is in the details, and the details suggest there are reasons to be optimistic. For one thing, 2014 and 2015 saw record levels of financing activity, and 2016 was still well above the historical average, to say nothing of the doldrums of 2009. When put in context, 2016 was a strong year. Also, while the number of companies raising capital and the number of overall deals fell across all industry categories in 2016 relative to 2015, the pullback was much more pronounced for the Media, Consumer Goods and Commercial Services sectors, while companies in the Software and IT Hardware sectors actually saw a slight uptick in the amount of capital raised. This suggests that some of the pullback is a result of investors being more disciplined and selective. Finally, VC funds raised more than $40 Billion in 2016, an increase of nearly 20% over 2015 and the most by far in the past 10 years. Raising a new fund takes a significant amount of time and energy, so it’s not surprising that a strong year for funds would coincide with a decline in financing activity. More importantly, VCs will be looking for ways to put all that new dry powder to work in 2017. All this suggests it’s too soon to say whether investors are closing their wallets or merely catching their breath after a flurry of investment activity over the past few years.

While the headline numbers in 2016 are eye-catching, arguably the most interesting development in the financing of startup companies in 2016 was the start of securities-based crowdfunding in the U.S. Since the SEC’s “Regulation Crowdfunding” took effect on May 16, 2016, startups have had the ability to raise capital by selling securities to nearly anyone, and the early results are promising. According to filings made with the SEC, as of December 31, 2016, 179 companies had filed to raise capital under Regulation Crowdfunding, and 34 of them had completed offerings in which they raised, in the aggregate, approximately $10 million. While $10 million is a drop in the ocean of startup financing, as the industry works out the kinks, crowdfunding will become an increasingly popular means of raising seed capital. As this happens, we will be watching carefully to see how much crowdfunding increases overall funding for startups, as opposed to supplanting angels and other seed-stage investors.

Monday, February 6, 2017

Mergers and Acquisitions: 2016 Update


Global January 28 2017
Global mergers and acquisitions volume in 2016 declined from the record levels set in 2015, but activity was nonetheless strong by historical standards. Value of global deals was approximately $3.7 trillion, an annual total behind only 2015 and 2007, according to Thomson Reuters. The value of U.S. transactions was approximately $1.7 trillion. Despite unexpected political and economic developments, M&A activity in 2016 reflected many of the trends of 2015.
Market Drivers
Mergers and acquisitions volume in 2016 again was dominated by strategic activity driven by fundamental forces — the need to grow revenues and earnings in a low-growth environment and to be competitively positioned in the global marketplace. Given these conditions, M&A has provided corporations a means to grow revenues faster than would be possible organically, and synergies resulting from transactions have provided opportunities to expand margins and drive more rapid earnings growth. Deal activity also has allowed strategic players to enhance geographic or portfolio footprints, or to position themselves as industry disruptors through the acquisition of new technologies.
These fundamental imperatives driving corporations’ rationale for pursuing mergers and acquisitions were coupled with a continued benign environment conducive to M&A, particularly in the United States. Favorable factors included stable equity markets, strong corporate balance sheets and the availability of acquisition financing at historically attractive rates. Importantly, C-suite and boardroom confidence about long-term opportunities continued, supporting deal initiatives. Additionally, shareholder support for deals in 2015, while not universal, in large part continued in 2016.
One noteworthy development was an increase in inbound U.S. M&A activity to record levels. The United States consistently has been an attractive destination for M&A due to factors including large market size, a growing (albeit slow-growth) economy, relatively stable capital markets and the rule of law. With actual or potential economic dislocations and political uncertainties threatening many of the world’s markets, it is no surprise that the U.S. continued to attract foreign investment in 2016. Inbound deal volume surpassed $500 billion, with significant transactional activity coming from Canada, China and the United Kingdom. Notably, Chinese outbound activity was at record levels — $221 billion, according to Thomson Reuters. While robust asset prices, a strong dollar, the potential impact of changes in Chinese policies affecting outbound transactions from China and concerns regarding the potential for growing economic nationalism may act as headwinds tempering this trend, significant cross-border deal flows into the U.S. appear likely to continue. (See “Regional Focus: Asia.”)
Unsolicited Activity
Hostile and unsolicited mergers and acquisitions continued to play a small but important role in the M&A market. In 2016, unsolicited transactions accounted for nearly $400 billion in global deal value.
The varied fates of unsolicited proposals in 2016 again demonstrated the uncertainty of outcomes in hostile activity. As in prior years, while hostile offerors in some situations successfully consummated transactions, success was by no means universal. In other cases, targets of unsolicited proposals ultimately were sold, but to a party other than the original offeror. As in 2015, there also were several examples of target companies successfully defending against unsolicited proposals without an alternative transaction. One notable example was the withdrawal by Canadian Pacific Railway of its unsolicited offer for Norfolk Southern Corp. after Norfolk Southern determined that the value generated under its own strategic plan was superior to that in Canadian Pacific’s offer and that the proposed transaction was highly unlikely to receive regulatory approval.
For a corporation driven by the fundamental imperatives discussed above, a hostile offer is sometimes the only path to pursue a strategically critical transaction. While commencing a hostile public offer is generally not a would-be acquirer’s preference given the cost and uncertainty of the outcome, the elimination of most target takeover defenses as a result of ongoing campaigns to implement governance “best practices” and the evolution of many companies’ shareholder bases make unsolicited activity an alternative in appropriate situations.
Abandoned Transactions
A number of large proposed transactions were withdrawn in 2016 after announcement, with estimates indicating that these abandoned deals represented over $800 billion globally, almost one-fifth the dollar value of transactions announced during that period of time. This statistic reflects transactions abandoned for a number of reasons, and at various stages, such as announced unsolicited offers that never progressed and deals that were signed but ultimately terminated as a result of shareholder dissatisfaction, emergence of a topping bid or regulatory issues.
Several large pharmaceuticals transactions were terminated following administration changes to tax regulations to halt so-called “inversion” transactions in which a U.S. company would be acquired by a smaller foreign company, effectively moving the home tax jurisdiction of the publicly traded parent outside the United States. A continuation of the trend of aggressive antitrust enforcement at the Department of Justice and the Federal Trade Commission — reflecting increased willingness on the part of the government to litigate rather than accept proposed settlements in transactions that raise substantive antitrust issues — led to several large transactions being abandoned. It is unclear how regulatory policy may change under a new administration in the U.S. and how that will impact deals this year. (See “Antitrust Enforcement in the Trump Administration.”)
Impact of Activism on M&A Activity
Despite some signs that hedge fund activism may have hit its high-water mark, including commentary from passive investors and other long-term institutional holders seeking to encourage long-term decision-making by corporate management, shareholder activists have continued to have a meaningful impact in the M&A market. (See "Directors Must Navigate Challenges of Shareholder-Centric Paradigm.")
In an environment supportive of mergers and acquisitions activity, and with both strategic and private equity buyers seeking targets, “sell the company” or “sell a business” platforms can be attractive to activist investors and other active managers looking for short-term returns. Activist campaigns have preceded sales at a number of companies this year. In other cases, activists have sought to block or renegotiate transactions. Appraisal litigation is another area where hedge funds have sought to use M&A transactions to harvest additional returns. (See “Key Developments of Delaware Corporation Law in 2016.”)
Activism is not going away, and market participants accordingly need to continue to factor in the potential for activist intervention and how best to respond.
Potential Impact of Administration Change on US M&A Activity
Equity markets to date have reacted favorably to the outcome of the presidential election and the resultant prospect of changes to fiscal and regulatory policies. The makeup of the Trump administration continues to take shape, and perspectives on likely administration policies continue to develop, making speculation regarding the new administration's impact on M&A activity just that —speculation. In the shorter term, uncertainty as to policy could impact the pace of deal activity. However, signals as to potential policy direction indicate areas of likely change that could result in meaningful, and generally favorable, impact on the M&A environment, such as adoption of a more business-friendly approach to regulation, increased competitiveness of the U.S. corporate tax regime and adoption of incentives to repatriate corporate cash held offshore. The impact of possible changes to fiscal policy, trade policy and national security review are more difficult to predict and could lead to positive or negative impacts on the deal environment.
Given the significance of some potential changes and the active dialogue of the administration with the corporate community, boards and executives considering extraordinary transactions should carefully consider the possible impact of administration policy.

Tuesday, December 6, 2016

How Do Venture Capitalists Make Decisions?



In How Do Venture Capitalists Make Decisions? (NBER Working Paper No. 22587), Paul Gompers, William Gornall, Steven N. Kaplan, and Ilya A. Strebulaev report on the results of a survey of 885 institutional venture capitalists (VCs) conducted between November 2015 and March 2016. The survey asked detailed questions covering business practices. Most respondents were graduates of top MBA programs or Kauffman Fellows. Some were recruited from a list of individual members of the National Venture Capital Association and the VentureSource database. Eighty-two percent of respondents were partners in their firms.

The researchers found that deal flow, deal selection, and VC value-add are all important contributors to value creation. Among these, deal selection was considered the most important. VCs view the quality of the management team as more important than the business model, product, or market, both in selecting deals and in deal success. Managerial ability, industry experience, and passion were prized qualities for management team selection.

Respondents indicated that their firms discovered or sourced deals primarily through their networks. Over 30 percent of deals were generated through "professional networks," 30 percent were "proactively self-generated," 20 percent were referred by other investors, 8 percent came from a portfolio company. Only 10 percent came inbound from company management teams. The median firm considered 100 deals in a year for every deal it closed or invested in. Firms specializing in information technology considered 151 deals for each investment made; those specializing in health care considered only 78. Deals for early startups that generated an offer were more likely to close than those for later-stage companies with longer track records.

More than 90 percent of respondents considered a company's management team an important factor in the success or failure of their investments. Over 55 percent of respondents considered the team the most important factor. After they invested, venture capital firms offered services such as strategic guidance (87 percent), connections to investors (72 percent), connections to customers (69 percent), operational guidance (65 percent), hiring board members (58 percent), and hiring employees (46 percent). Respondents reported little flexibility about a number of dimensions of corporate structure, including liquidation preferences, vesting rules, antidilution protection, and board control.

—Linda Gorman

Friday, November 18, 2016

M&A at a Glance (November 2016) Paul, Weiss, Rifkind, Wharton & Garrison LLP



Canada, Netherlands, United Kingdom, USA November 15 2016

M&A volume in October 2016 increased to record levels, as measured by total dollar value, largely due to a spike in the number of megadeals, with eight October deals valued at or above $10 billion dollars. Total deal volume in the U.S. and globally rose in October 2016, by 163% to $341.10 billion and by 75.6% to $549.10 billion, respectively-the highest monthly deal volume totals since the inception of this publication in April 2012. Despite the increase in M&A volume, however, the number of deals continued to fall towards record-low territory, with U.S. deals falling by 8.5% to 668 and global deals by 10.4% to a twelve-month low of 2,567.

The surge in overall deal volume, as measured by dollar value, was driven primarily by strategic activity, although sponsor-related deal volume also rose. Strategic transactions accounted for a large portion of total deal volume, both in the U.S. and globally (91.2%, as compared to 79.1% over the last 12 months; and 87.3%, as compared to 81.3% over the last 12 months, respectively). Strategic deal volume increased in the U.S. by 176.8% to $311.31 billion and globally by 79.6% to $479.48 billion. The number of strategic deals declined in the U.S. by 10.2% to 536 and globally by 11.8% to 2,258. In sponsor-related activity, U.S. deal volume increased by 73% to $29.79 billion, and global deal volume increased by 52.2% to $69.62 billion. The number of sponsor-related deals in October 2016 remained near September levels, both in the U.S. and globally (132 and 309, respectively).

Crossborder activity followed a similar trend, with particularly strong results in the U.S. outbound market. Outbound U.S. deal volume increased by 208.7% to $61.31 billion, driven primarily by Qualcomm Incorporated's offer to acquire NXP Semiconductors N.V. for approximately $47.00 billion, and the number of deals increased by 10.9% to 112. Inbound U.S. deal volume increased by 44.4% to $98.53 billion, while the number of deals decreased by 16.2% to 114. Globally, crossborder deal volume rose by 52.2% to $205.95 billion and the number of deals decreased by 11.7% to 610, reaching a new 12-month low. Figure 1 and Annex Figures 5A-7A. The Netherlands claimed the lead for monthly outbound U.S activity by volume in October 2016 ($48.14 billion), while the U.K. maintained its 12-month lead ($72.22 billion). As for inbound activity, the U.K. overtook Canada as the leading country of origin in deal volume in October 2016 ($60.95 billion), while Canada maintained its 12-month lead ($120.01 billion).


Leisure and Recreation was the most active target industry by deal volume in the U.S. in October 2016 ($108.75 billion), boosted by AT&T Inc.'s $83.07 billion offer to acquire Time Warner Inc. Consumer Products was the second-most active target industry, driven by British American Tobacco Plc's $46.55 billion offer to acquire Reynolds American Inc. The AT&T offer and the British American Tobacco offer are two of the largest U.S. public mergers announced over the last 12 months. Figure 5. Computers & Electronics remained the most active target industry by number of deals for the month (168) and maintained its position as the most active target industry for the last 12 months, as measured by both volume ($274.19 billion) and number of deals (2,482).


With respect to U.S. public mergers, notwithstanding a spike in average deal value, both break and reverse break fees remained in line with historical levels.No transaction in October 2016 involving a strategic buyer had a go-shop provision.. In line with the rise of strategic transactions, the use of cash consideration in October 2016 was below its 12-month average (35.7%, as compared to 62.5%). Finally, the incidence of tender offers as a percentage of U.S. public mergers decreased to 7.1% (as compared to its 12-month average of 22.8%), again, possibly as a result of the prominence of strategic deals in October, which may not experience any timing or other advantages from using a two-step merger structure.

Saturday, May 21, 2016

Berkery Noyes Software Industry M&A Report For First Quarter 2016


Berkery Noyes has released its Q1 2016 mergers and acquisitionstrend report for the Software Industry. The report analyzes M&A activity in the Software Industry during Q1 2016 and compares it with the past four quarters.
 
Transaction volume experienced a seven percent gain over the past three months, with a total of 523 deals in Q1 2016. Overall value fell 81 percent, from $111.5 billion to $21.6 billion. There were four transactions in Q4 2015 with a combined value of approximately $86 billion. This included Dell’s announced acquisition of EMC Corporation for $67.5 billion. If these four deals are excluded, value decreased 15 percent from Q4 2015 to Q1 2016. Aggregate value also declined nine percent on a year-over-year basis. The number of deals throughout the past five quarters reached its peak in Q3 2015, whereas value reached its zenith in Q4 2015.

Strategic acquirers completed eight of the top ten highest value software deals in Q1 2016. The industry’s largest transaction year-to-date was Cisco Systems’ acquisition of Jasper Technologies, an Internet of Things (IoT) service platform, for $1.4 billion. This followed Cisco’s IoT related acquisition of ParStream in Q3 2015. The Jasper acquisition was one of the highest value IoT deals ever completed in this nascent marketplace. In terms of active industry acquirers, Cisco completed two other software transactions in Q1 2016 with the announced acquisition of CliQr, a provider of application-defined cloud management solutions, for $260 million; and Synata, an enterprise cloud search engine.

Deal volume in the “Niche Software” segment, which is targeted to specific vertical markets, increased six percent in Q1 2016. Niche Software was the best represented segment in the top ten list of highest value transactions with eight deals. Three of these eight acquisitions occurred in the Healthcare vertical.

Along these lines were GI Partners’ announced acquisition of Netsmart Technologies, a provider of electronic health records, patient management, billing and other solutions for the health and human services sector, which is being acquired in a joint venture with Allscripts, for $950 million; ResMed’s announced acquisition of Brightree, a cloud-based software company that serves the post-acute care sector, for $800 million; and Wipro’s announced acquisition of HealthPlan Services, a technology and Business Process as a Service (BPaaS) provider that serves the U.S. health insurance sector, for $460 million.

Consumer Software M&A activity improved 22 percent in Q1 2016, the segment’s third consecutive quarterly rise. The Business Software segment, which consists of software designed for general business practices and not specific industry markets, saw an 18 percent increase in volume throughout the past three months.

Deal volume in the Infrastructure Software segment declined 21 percent in Q1 2016, which marked a return to its Q3 2015 level. The largest Infrastructure transaction during the quarter was Micro Focus’ announced acquisition of Serena Software, which specializes in application lifecycle management (ALM) software, for $540 million.

Other high value Infrastructure deals were Microsoft Corporation’s announced acquisition of Xamarin, which develops software solutions for mobile application development, with a reported purchase price between $400 and $500 million; and Oracle’s announced acquisition of Ravello, a provider of cloud-based virtualization software solutions, with a reported purchase price between $400 and $450 million. As for the cyber-security sector, notable deals included FireEye’s acquisitions of iSIGHT Partners for $200 million and Invotas International Corporation; and IBM with the acquisition of Resilient Systems.



Berkery Noyes Releases Software Industry M&A Report For First Quarter 2016

Monday, April 04, 2016
NEW YORK — April 4, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its Q1 2016 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity in the Software Industry during Q1 2016 and compares it with the past four quarters.
Transaction volume experienced a seven percent gain over the past three months, with a total of 523 deals in Q1 2016. Overall value fell 81 percent, from $111.5 billion to $21.6 billion. There were four transactions in Q4 2015 with a combined value of approximately $86 billion. This included Dell’s announced acquisition of EMC Corporation for $67.5 billion. If these four deals are excluded, value decreased 15 percent from Q4 2015 to Q1 2016. Aggregate value also declined nine percent on a year-over-year basis. The number of deals throughout the past five quarters reached its peak in Q3 2015, whereas value reached its zenith in Q4 2015.
Strategic acquirers completed eight of the top ten highest value software deals in Q1 2016. The industry’s largest transaction year-to-date was Cisco Systems’ acquisition of Jasper Technologies, an Internet of Things (IoT) service platform, for $1.4 billion. This followed Cisco’s IoT related acquisition of ParStream in Q3 2015. The Jasper acquisition was one of the highest value IoT deals ever completed in this nascent marketplace. In terms of active industry acquirers, Cisco completed two other software transactions in Q1 2016 with the announced acquisition of CliQr, a provider of application-defined cloud management solutions, for $260 million; and Synata, an enterprise cloud search engine.
Deal volume in the “Niche Software” segment, which is targeted to specific vertical markets, increased six percent in Q1 2016. Niche Software was the best represented segment in the top ten list of highest value transactions with eight deals. Three of these eight acquisitions occurred in the Healthcare vertical.
Along these lines were GI Partners’ announced acquisition of Netsmart Technologies, a provider of electronic health records, patient management, billing and other solutions for the health and human services sector, which is being acquired in a joint venture with Allscripts, for $950 million; ResMed’s announced acquisition of Brightree, a cloud-based software company that serves the post-acute care sector, for $800 million; and Wipro’s announced acquisition of HealthPlan Services, a technology and Business Process as a Service (BPaaS) provider that serves the U.S. health insurance sector, for $460 million.
Consumer Software M&A activity improved 22 percent in Q1 2016, the segment’s third consecutive quarterly rise. The Business Software segment, which consists of software designed for general business practices and not specific industry markets, saw an 18 percent increase in volume throughout the past three months.
Deal volume in the Infrastructure Software segment declined 21 percent in Q1 2016, which marked a return to its Q3 2015 level. The largest Infrastructure transaction during the quarter was Micro Focus’ announced acquisition of Serena Software, which specializes in application lifecycle management (ALM) software, for $540 million.
Other high value Infrastructure deals were Microsoft Corporation’s announced acquisition of Xamarin, which develops software solutions for mobile application development, with a reported purchase price between $400 and $500 million; and Oracle’s announced acquisition of Ravello, a provider of cloud-based virtualization software solutions, with a reported purchase price between $400 and $450 million. As for the cyber-security sector, notable deals included FireEye’s acquisitions of iSIGHT Partners for $200 million and Invotas International Corporation; and IBM with the acquisition of Resilient Systems.
- See more at: http://www.berkerynoyes.com/publication/pr/2016softwareQ1.aspx#sthash.WGLPIqiu.dpuf

Berkery Noyes Software Industry M&A Report For Full Year 2015



Berkery Noyes has released its full year 2015 mergers andacquisitions trend report for the Software Industry. The report analyzes M&A activity in the Software Industry during 2015 and compares it with data covering 2013 and 2014.

Deal volume experienced a nine percent year-to-year increase, with a total of 2,028 transactions in 2015. Overall value gained 72 percent, from $123.74 billion to $213.20 billion. This rise was attributable in major part to Dell’s announced acquisition of EMC Corporation for $67.48 billion, which was the highest value deal ever recorded in the industry.

The EMC acquisition accounted for almost one-third of the industry’s aggregate value in 2015. If excluded, total value gained 18 percent on a yearly basis. With this transaction, Dell is looking to combine its server businesses with EMC’s storage and virtualization assets, enabling it to better compete beyond the PC market with a wider range of products. Also of note, Michael Dell and Silver Lake Partners took Dell private in 2013 for $24 billion.

In terms of valuations, the median revenue multiple declined from 2.7x to 2.4x, while the median EBITDA multiple improved from 12.0x to 13.8x. Deals in the $10-$20 million range over the past three years received a median enterprise value multiple of 2.3x revenue, whereas those above $160 million had a median enterprise value multiple of 3.6x revenue.

Financial sponsors were responsible for five of the industry’s top ten largest deals in 2015. Three of these five transactions occurred in the Infrastructure segment. This consisted of The Carlyle Group’s announced acquisition of Veritas Technologies Corporation, a storage and server management software solutions business, for $8 billion; Permira and CPP Investment Board’s acquisition of Informatica, a provider of enterprise data integration software and services, for $4.77 billion; and Thoma Bravo and Silver Lake Partners’ announced acquisition of SolarWinds, an IT management software and monitoring company, for $4.38 billion.

As for volume in the Infrastructure Software segment, deal activity improved 19 percent over the past year. Upon examination of the information security subsector, Blue Coat Systems was a notable acquirer in 2015 with Elastica, a cloud security startup, for $280 million; and Perspecsys, a cloud data protection platform. This followed Bain Capital’s acquisition of Blue Coat earlier in the year for $2.4 billion. With these acquisitions, Blue Coat is positioning itself as a leader in the cloud access security broker (CASB) space. Regarding high profile strategic Infrastructure deals, EMC acquired Virtustream, which offers cloud computing management software, for $1.2 billion prior to the Dell acquisition.

The Consumer Software segment underwent a 27 percent decrease in volume. This followed a 14 percent rise between 2013 and 2014. The largest Consumer deal during 2015 was the announced acquisition of Qihoo 360 Technology, an internet security company based in China, which was taken private by an investor consortium for $8.28 billion.

Transaction activity in the “Niche Software” segment, which is targeted to specific vertical markets, saw a 17 percent gain. Three of the industry’s top ten deals occurred in the Niche segment, including two related to the automobile market. Accordingly Vista Equity Partners acquired Solera Holdings, which provides risk management software to the automotive and property marketplace, for $6.25 billion; and Cox Automotive acquired Dealertrack Technologies, a web-based software solutions and services company for automotive retailers, for $4.36 billion.

Meanwhile, the number of deals in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, increased 12 percent. The most active acquirer in the Business segment in 2015 was Microsoft with seven transactions.

“With the increased adoption of cloud and SaaS environments even software companies are recognizing the innate ability to integrate rather than develop everything," said James Berkery, Chief Information Officer at Berkery Noyes. "It stands to reason as more software solutions appear on the web that the proliferation of the API has begun to create an integration market unto itself. A sort of API marketplace with brokered solutions, tech enabled services and niche applications is poised to capitalize."

Thursday, May 19, 2016

Berkery Noyes Media and Marketing Industry M&A Report For Full Year 2015

 
Berkery Noyes has released its full year 2015 mergers andacquisitions trend report for the Media and Marketing Industry. The report analyzes M&A activity in the Media and Marketing Industry during 2015 and compares it with data covering 2013 and 2014.
 
The firm’s research shows deal volume improved eight percent on a year-to-year basis. Aggregate value gained 12 percent, from $97.07 billion to $109.01 billion. In terms of valuations, the median revenue multiple moved slightly from 2.0x to 1.9x, while the median EBITDA multiple decreased from 11.0x to 8.7x. Deals in the $10-$20 million range over the last three years received a median enterprise value multiple of 1.5x revenue, whereas those above $160 million had a median enterprise value multiple of 2.8x revenue. The number of private equity backed transactions increased 13 percent during the past year, from 207 to 233.

The Internet Media segment underwent a 19 percent increase in deal activity. Online shopping giant Alibaba Group was a notable segment acquirer with the announced acquisition of Youku Tudou, a Chinese-based Internet television platform that enables users to search, view and share video content across multiple devices, for $3.37 billion. Alibaba, in which Yahoo! owns a 15 percent stake, also completed a related deal in 2014 when it acquired a 60 percent stake in ChinaVision Media Group, a television and film producer.

The Marketing segment experienced a six percent rise in volume. Of note, there were no Marketing acquisitions that made the industry’s top ten list of highest value deals during the year, as opposed to four in 2014. High profile segment transactions in 2015 included Dalian Wanda Group’s announced acquisition of Infront Sports & Media AG, an international sports marketing company that offers an array of services such as media rights distribution, brand development, and event sponsorship, for $1.2 billion; comScore’s announced acquisition of Rentrak Corporation, a cross-platform media measurement firm, for $827 million; and GTCR and Adams Outdoor Advertising’s announced acquisition of Fairway Outdoor Advertising, which operates about 20,000 bulletins, posters and digital billboards, for $575 million.

As for other areas covered in the report, the segment with the largest year-to-year rise in volume was Exhibitions, Conferences, and Events. This sector saw volume increase 33 percent, from 85 to 113 acquisitions. The most active related acquirer in 2015, either directly or through an affiliated business, was Providence Equity Partners with six transactions.

M&A activity in the Entertainment segment, after rising six percent during 2014, remained constant over the past year. Regarding value, the segment’s largest transaction in 2015 was Activision Blizzard’s acquisition of King Digital Entertainment, creator of the well-known mobile game Candy Crush Saga, for $5.9 billion.

Deal flow within the B2B Publishing and Information segment improved 11 percent on a yearly basis. In addition, the B2B segment had the industry’s largest rise in value, more than doubling from $9.38 billion to $23.01 billion. This gain was due in part to Intercontinental Exchange’s acquisition of Interactive Data Corporation, a provider of financial market data and analytics, for $7.45 billion. Other notable segment deals included Verisk Analytics’ acquisition of Wood Mackenzie, a data analytics and research firm focused on the oil, gas and mining market, for $2.79 billion; McGraw Hill Financial’s acquisition of SNL Financial, a news, data, and analysis provider, for $2.23 billion; and Equifax’s announced acquisition of Veda, a consumer and commercial credit reporting company, for $1.86 billion.

In terms of the Consumer Publishing segment, volume declined five percent in 2015. The largest Consumer Publishing transaction during the year was Japanese media group Nikkei’s announced acquisition of The Financial Times from Pearson for $1.3 billion. Previously mentioned Alibaba also completed a deal in the segment with the acquisition of South China Morning Post, an English language daily newspaper in Hong Kong. Jack Ma of Alibaba is now one of several Internet and tech leaders who have made notable recent investments in the Consumer Publishing space, following others such as Amazon’s Jeff Bezos with the acquisition of The Washington Post for $250 million in 2013. 

Meanwhile, the most active Consumer Publishing acquirer in 2015 was Adams Publishing Group. The family-owned media company, which owns community newspapers, specialty magazines, radio stations, and other products in its portfolio, completed five deals.

“There has been a steady uptick in media mergers and acquisitions activity, with more deals on the horizon and a positive outlook going forward,” said Vineet Asthana, Managing Director at Berkery Noyes. “Companies with a balance of revenue streams, some recurring revenue and more subscription type products in the mix are especially attractive to acquirers.”



Berkery Noyes Releases Media and Marketing Industry M&A Report For Full Year 2015

Wednesday, January 06, 2016
NEW YORK — January 6, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2015 mergers and acquisitions trend report for the Media and Marketing Industry. The report analyzes M&A activity in the Media and Marketing Industry during 2015 and compares it with data covering 2013 and 2014.
The firm’s research shows deal volume improved eight percent on a year-to-year basis. Aggregate value gained 12 percent, from $97.07 billion to $109.01 billion. In terms of valuations, the median revenue multiple moved slightly from 2.0x to 1.9x, while the median EBITDA multiple decreased from 11.0x to 8.7x. Deals in the $10-$20 million range over the last three years received a median enterprise value multiple of 1.5x revenue, whereas those above $160 million had a median enterprise value multiple of 2.8x revenue. The number of private equity backed transactions increased 13 percent during the past year, from 207 to 233.
The Internet Media segment underwent a 19 percent increase in deal activity. Online shopping giant Alibaba Group was a notable segment acquirer with the announced acquisition of Youku Tudou, a Chinese-based Internet television platform that enables users to search, view and share video content across multiple devices, for $3.37 billion. Alibaba, in which Yahoo! owns a 15 percent stake, also completed a related deal in 2014 when it acquired a 60 percent stake in ChinaVision Media Group, a television and film producer.
The Marketing segment experienced a six percent rise in volume. Of note, there were no Marketing acquisitions that made the industry’s top ten list of highest value deals during the year, as opposed to four in 2014. High profile segment transactions in 2015 included Dalian Wanda Group’s announced acquisition of Infront Sports & Media AG, an international sports marketing company that offers an array of services such as media rights distribution, brand development, and event sponsorship, for $1.2 billion; comScore’s announced acquisition of Rentrak Corporation, a cross-platform media measurement firm, for $827 million; and GTCR and Adams Outdoor Advertising’s announced acquisition of Fairway Outdoor Advertising, which operates about 20,000 bulletins, posters and digital billboards, for $575 million.
As for other areas covered in the report, the segment with the largest year-to-year rise in volume was Exhibitions, Conferences, and Events. This sector saw volume increase 33 percent, from 85 to 113 acquisitions. The most active related acquirer in 2015, either directly or through an affiliated business, was Providence Equity Partners with six transactions.
M&A activity in the Entertainment segment, after rising six percent during 2014, remained constant over the past year. Regarding value, the segment’s largest transaction in 2015 was Activision Blizzard’s acquisition of King Digital Entertainment, creator of the well-known mobile game Candy Crush Saga, for $5.9 billion.
Deal flow within the B2B Publishing and Information segment improved 11 percent on a yearly basis. In addition, the B2B segment had the industry’s largest rise in value, more than doubling from $9.38 billion to $23.01 billion. This gain was due in part to Intercontinental Exchange’s acquisition of Interactive Data Corporation, a provider of financial market data and analytics, for $7.45 billion. Other notable segment deals included Verisk Analytics’ acquisition of Wood Mackenzie, a data analytics and research firm focused on the oil, gas and mining market, for $2.79 billion; McGraw Hill Financial’s acquisition of SNL Financial, a news, data, and analysis provider, for $2.23 billion; and Equifax’s announced acquisition of Veda, a consumer and commercial credit reporting company, for $1.86 billion.
In terms of the Consumer Publishing segment, volume declined five percent in 2015. The largest Consumer Publishing transaction during the year was Japanese media group Nikkei’s announced acquisition of The Financial Times from Pearson for $1.3 billion. Previously mentioned Alibaba also completed a deal in the segment with the acquisition of South China Morning Post, an English language daily newspaper in Hong Kong. Jack Ma of Alibaba is now one of several Internet and tech leaders who have made notable recent investments in the Consumer Publishing space, following others such as Amazon’s Jeff Bezos with the acquisition of The Washington Post for $250 million in 2013. Meanwhile, the most active Consumer Publishing acquirer in 2015 was Adams Publishing Group. The family-owned media company, which owns community newspapers, specialty magazines, radio stations, and other products in its portfolio, completed five deals.
“There has been a steady uptick in media mergers and acquisitions activity, with more deals on the horizon and a positive outlook going forward,” said Vineet Asthana, Managing Director at Berkery Noyes. “Companies with a balance of revenue streams, some recurring revenue and more subscription type products in the mix are especially attractive to acquirers.”
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