Petsky Prunier’s Deal Notes: 2011 M&A and Investment Activity in the Marketing, Media, Technology and Service Industries Up 187%

Below is an article regarding Petsky Prunier’s Deal Notes: 2011 M&A and Investment Activity.  

2011 Transaction Activity in the Marketing, Media, Technology and Service Industries Up 187%; Deal Value Up 152% on a Year-Over-Year Basis
2011 Review: 3,026 Transactions Totaling $141.6 Billion

DIGITAL MEDIA/COMMERCE THE MOST ACTIVE AND HIGHEST VALUE SEGMENT IN 2011

WITH 1,159 TRANSACTIONS AND $44 BILLION IN DEAL VALUE

Mergers and acquisitions and investment activity
in the Marketing, Media, Technology and Service industries grew 187 percent in 2011, while aggregate transaction value increased 152 percent, compared to 2010. During 2011, Petsky Prunier tracked 3,026 transactions for a total of $141.6 billion across seven broad segments: Digital Advertising, Agency/Consulting, Marketing Technology, Digital Media/Commerce, Software & Information, Out-of-Home & Specialty Media and Marketing Services. Digital Media/Commerce was the most active and highest value segment with 1,159 transactions worth $44 billion in deal value.

M&A ACTIVITY
For control transactions only, Digital Media/Commerce was the most active and highest value segment in 2011 with 470 transactions and $28.3 billion in M&A deal value. The Social Media/Apps subsegment accounted for more than one-third of the segment’s aggregate transaction value, while eCommerce represented 29 percent. Compared to 2010, M&A transaction volume in the Digital Media/Commerce segment nearly tripled, while aggregate transaction value increased by 289 percent. The segment accounted for one of the largest deals of 2011: Microsoft’s $8.5 billion acquisition of Skype at 9.9x revenue and 32.2x EBITDA.

The second most active M&A segment in 2011 was Marketing Technology with 338 transactions valued at $21.9 billion. Marketing Technology deals accounted for three of the year’s 10 highest value transactions across all segments, including:

• eBay’s $2.4 billion acquisition of GSI Commerce at 1.8x revenue and 23.1x EBITDA
• KKR’s $2.3 billion acquisition of Go Daddy Software at 2.4x revenue
• Oracle’s $1.5 billion acquisition of RightNow Technologies at 6.9x revenue and 66.4x EBITDA

Software & Information was the third most active M&A segment with activity and value increasing 111 percent and 156 percent, respectively, from 2010. There were 179 transactions worth approximately $43.9 billion in 2011, of which five were among the year’s highest value transactions:

• Hewlett-Packard’s $11.7 billion acquisition of Autonomy at 19.4x revenue and 43.9x EBITDA
• SAP’s $3.4 billion acquisition of SuccessFactors at 11.7x revenue
• Infor Global Solutions’ $2.1 billion acquisition of Lawson Software at 2.7x revenue and 15.4x EBITDA
• Datatel’s $1.8 billion acquisition of SunGard Higher Education at 0.4x revenue
• Providence Equity Partners’ $1.6 billion buyout of Blackboard at 3.5x revenue and 18.9x EBITDA

M&A activity in Digital Advertising in 2011 increased by 110 percent, with 151 deals announced for approximately $4 billion. The Digital Video subsegment accounted for the highest aggregate transaction value with 24 deals announced for $1.1 billion, a 338 percent increase in deal value compared to 2010.

Within the Agency/Consulting segment, the Digital Agency subsegment had the most significant year-over year increase in activity, with 80 deals announced for $2.2 billion versus 37 deals for $1.3 billion in 2010. Transactions in the segment included:

• Bridgepoint Capital’s $852 million buyout of Infront Sports & Media at 1.0x revenue
• Publicis Groupe’s $575 million acquisition of Rosetta at 2.3x revenue and 12.5x EBITDA
• Epsilon’s $345 million acquisition of Aspen Marketing Services at 1.4x revenue and 8.6x EBITDA

INVESTMENT ACTIVITYThere were 1,505 investments announced in 2011 worth approximately $26.9 billion. Compared to 2010, investment activity grew in each segment, with the largest changes occurring in Software & Information and Digital Media/Commerce, where investment activity increased 464 percent and 320 percent, respectively. Within the Digital Media/Commerce segment, the Social Media/Apps, eCommerce, Mobile Content/Apps and Gaming subsegments accounted for 70 percent of all investments. Digital Media/Commerce investments included:

• Silver Lake Partners’ $1.6 billion investment in Alibaba Group at a reported $32 billion valuation
• Digital Sky Technologies’ $1.5 billion investment in 360buy.com at a reported $10 billion valuation
• Equity Partners Fund’s $682 million investment in Zfere Holdings

Investment activity in the Marketing Technology segment was up 153 percent compared to 2010. The Social Technology and Mobile Technology subsegments accounted for one-third of that segment’s investments.

BUYER & INVESTOR ACTIVITY
Strategic buyers accounted for approximately half of all control deals and 64 percent of transaction value in 2011, with 1,409 transactions for approximately $90.9 billion. Compared to 2010, strategic deal volume increased 148 percent, while aggregate deal value increased 147 percent. Google and Publicis were the most active strategic buyers in 2011 with 29 and 22 transactions, respectively. WPP and eBay followed with 18 and 11 announced acquisitions, respectively.

Buyout firms announced 112 acquisitions for a total of $23.7 billion, an increase in activity of 229 percent from 2010 and a 95 percent increase in deal value. Sizeable buyout transactions announced in 2011 included:

• Thomas H. Lee’s $1.1 billion buyout of inVentiv Health at 1.0x revenue and 8.3x EBITDA
• Apax Partners’ $959 million buyout of Activant Solutions at 2.6x revenue and 9.3x EBITDA


Venture and growth capital investors announced 1,505 transactions worth approximately $26.9 billion. Compared to 2010, investment transaction volume and value increased by 234 percent and 270 percent, respectively. Accel Partners, Kleiner Perkins Caufield & Byers, Sequoia Capital, Google Ventures and Intel Corporation were the most active financial investors, announcing more than 20 investments each during 2011.

IPO ACTIVITY
There were 25 IPOs in the Marketing, Media, Technology and Service industries in 2011. Reflecting continued market volatility, there were only seven IPOs in the second half of the year: Angie’s List, Groupon, Jive Software, Nexon, Tudou Holdings, Zillow and Zynga, which all priced at the high end or above their initial filing ranges. With the exception of Nexon, Tudou Holdings and Zynga, which closed down two percent, 12 percent and five percent, respectively, the other four companies’ shares closed up from final pricing at least 25 percent on the first day of trading. There are currently 20 companies with securities in registration from 2011 filings.

4Q11 M&A AND INVESTMENT SUMMARY
In 4Q11, Petsky Prunier tracked 764 M&A and investment transactions worth approximately $27.2 billion. Compared to 3Q11, deal activity decreased by six percent, while aggregate deal value decreased by 42 percent. Digital Media/Commerce was the most active and highest value segment accounting for 34 percent of all deals announced and 19 percent of aggregate deal value. Venture and growth capital investments. accounted for 49 percent of all transactions, while strategic buyers represented 47 percent and buyout firms just four percent. The largest acquisitions were:

• SAP’s $3.4 billion acquisition of SuccessFactors
• Oracle’s $1.5 billion acquisition of RightNow Technologies
• Permira Advisors’ $1.5 billion buyout of Genesys Telecommunications Laboratories

The largest investment was a $1.6 billion growth capital transaction with China-based Alibaba Group, led by Silver Lake Partners, at a reported $32 billion valuation.

Note: Transaction values include only reported up-front cash payments and do not account for any potential future performance-based compensation.