private equity online for profit bankers
Berkery Noyes

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First Half 2010 Private Equity Information Industry Merger & Acquisition Trends

Total aggregate value of Private Equity transactions decreased by 9% from $14.82 billion in 2nd Half 2009 to $13.54 billion in 1st Half 2010, despite a tremendous gain in the Financial Services & Accounting sector, which rose 2,512% from $313 million in 2nd Half 2009 to $8.19 billion in 1st Half 2010.

Median revenue multiples in Private Equity M&A activity fell slightly in the 1st Half of 2010, from 2.5 to 2.2, yet this number still represents a 100% increase from the revenue multiple low of 1.1 in 1st Half 2009.

Private Equity M&A activity saw a 22% increase in volume from 117 transactions in 2nd Half 2009 to 143 transactions in 1st Half 2010, a total that exceeds each of the four preceding sixth month periods.  Of particular note, the Business & Compliance sector grew by 55% from 11 to 17 transactions.

The top three acquisitions by value in 1st Half 2010 all originated within the Financial Services & Accounting segment: Warburg Pincus and Silver Lake Partners’ pending acquisition of Interactive Data Corporation, which is majority owned by Pearson plc, for $3.25 billion, TPG Capital’s announced acquisition of Vertafore, Inc. for $1.40 billion, and MSCI, Inc.’s announced acquisition of RiskMetrics Group, Inc. for $1.39 billion.

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First Half 2010 Information Industry Merger & Acquisition Trends

The Information Industry saw revenue multiples rise 38% to 2.2 in the 1st Half 2010 from 1.6 in 2nd Half 2009, marking a return to the 30 month multiple high of 1st Half 2008.

The Information Industry saw a 21% increase in volume from Second Half 2009 to 1st Half 2010, exceeding the total volume of each of the four preceding sixth month periods, yet total transaction value decreased by 10% from $56.62 billion to $51.23 billion during the same period.

The decline in total transaction value is due in large part to two large transactions — Comcast Corporation’s pending acquisition of NBC Universal, a subsidiary of General Electric Company, for $13.75 billion and IMS Health’s pending acquisition by TPG Capital, L.P. and CPP Investment Board for $4.01 billion — in the final quarter of 2009. Despite this decline in aggregate value, median enterprise value has increased 19% from $20 .1 million in 2nd Half 2009 to $28.5 million in 1st Half 2010.

Marketing & Advertising saw a 17% increase in transaction volume and several notable acquisitions, namely the acquisition of Quattro Wireless by Apple, Inc., as the smartphone maker looks to increase its presence in the mobile advertising industry.

Lifestyle & Entertainment was the most active market segment within the Information Industry, with 186 transactions.  A significant portion of the acquisitions involved website and video game publisher targets.

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First Half 2010 Online & Mobile Merger & Acquisition Trends

While revenue multiples have decreased from 2.1 in 2nd Half 2009 to 1.8 to 1st Half 2010, mergers & acquisitions in the sector nonetheless saw strong growth, as evidenced by a 31% increase in transaction volume, exceeding the total volume of each of the four preceding sixth month periods.

The segment with the largest increase in transaction volume was E-Marketing & Search, with a 47% increase from 83 transactions in 2nd Half 2009 to 122 transactions in 1st Half 2010.  The segment with the largest decrease in transaction value was E-Content which fell 59%, from $2.06 billion in 2nd Half 2009 to $850 million in 1st Half 2010.

Of the top ten deals, five occurred within the E-Commerce segment, which represents traditional e-commerce businesses as well as e-commerce enabling technologies.

Google, Inc. was the most active buyer within the online Industry, with ten transactions. Two of the companies acquired by Google, Inc. were founded by former Google employees (Aardvark, reMail) while another acquisition, Picnik, Inc., employed a CEO who had already sold his company, Phatbits, to Google in 2005.

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First Half 2010 Software Industry Merger & Acquisition Trends

Software saw a 24% increase in volume, exceeding the total volume of each of the four preceding sixth month periods.  Consumer Applications saw a 94% jump in volume from 2nd Half 2009, indicating a market eager to attract end users with innovation.

EBITDA multiples in the Software industry experienced a 30% half-to-half increase from 11.3 in 2nd Half 2009 to 14.7 in 1st Half 2010.  This is a 42% increase from the low of 8.5 in 1st Half 2009.

The proliferation of smartphones, and in particular those with application-oriented operating systems, have helped mobile application software to rise 79% from the past half year, from 31 to 59. This rise becomes even more significant when juxtaposed with the modest growth of 27% from 1st half of 2009 to the 2nd half and of 24% from 2nd half 2008 to 1st half 2009.

Of the top ten deals, four companies being acquired have been in business since 1995. The sale of Cybersource Corporation, Sybase Inc., Palm Inc., and the exit of Verisign, Inc. from its main authentication business, marks the consolidation of once-prominent software industry brands.

Online Transactions within the Software Industry increased, rising to 43% of the total software market in 1st Half 2010.  The rise was driven mostly by the strength of Cloud Computing, SaaS, Mobile, and Internet Enabling Applications.

Google, Inc. was the most active buyer within the Software Industry, with nine transactions, acquiring technologies from social network search engines to online document editing.

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First Half 2010 Media Merger & Acquisition Trends

The Media sector saw a 21% increase in volume, which, coupled with a 54% increase in financially sponsored transactions, indicates a strong return from the lows of 1st Half 2009.  Transaction volume this half has exceeded the three preceding sixth month periods.

Revenue multiples in the media industry experienced a half-to-half gain with a 14% increase in the median enterprise value/revenue multiple, from 1.5 in 2nd Half 2009 to 1.7 in 1st Half 2010.  This rise brings the median enterprise value/revenue multiple within 35% of its peak in 1st Half 2008.

In 1st Half 2010, online media transactions comprised 45% of total media deals, a ratio that has increased from 28% in 1st Half 2008, which follows a 20% volume increase in the Internet Media segment.

Yahoo, Inc. was the most active buyer within the Internet Media segment, with three transactions.  By purchasing Koprol, Associated Content, Inc., and Citizen Sports, Yahoo has acquired technologies to both personalize and localize its online services for users.

Two of the largest Media Industry transactions tracked by Berkery Noyes were within the regulatory and compliance segment, with the purchases of Complinet by Thomson Reuters and RiskMetrics by MSCI, Inc., for $1.38 billion.  These transactions indicate a market eager to both safeguard itself and adapt to new regulatory policy.

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