Q4 2010 - Digital Media M&A and Financings Update
by: Aaron Solganick and Chad Gardiner,
Generation Equity Advisors, LLC
M&A Remains Strong
The number of M&A deals in the Digital Media sector for 2010 is 40% up from 2009. Most deals in 2010 were small, under $1 billion--there were only six media and information deals valued over $1 billion. We expect 2011 to show further improvement in transaction volume and value.
Google continues to be very active, having made 17 acquisitions during 2010. Google, AOL, Groupon, Publicis, IBM, Playdom, Zynga and other leading media companies will likely to keep the media M&A surge going into 2011 given their large cash positions.
The most active sectors overall within Digital Media in 4Q 2010 include daily deals, social gaming, and ad targeting/analytics.
Daily deals and shopping club online media companies were some of the most active segments in the 4Q 2010 with 7 deals announced, including 4 acquisitions and 3 investments worth $1.2 billion. Transactions included Google’s (GOOG) attempted acquisition of Groupon for $6 billion, EBays’s (EBAY) purchase of brands4friends and Amazon’s (AMZN) acquisition of BuyVIP. Among notable venture investments, Groupon raised $950 million from Kleiner Perkins Caufield & Byers, DST, Fidelity and Morgan Stanley. LivingSocial raised $175 million from Amazon.com and Privalia raised $95 million from Index Ventures and General Atlantic.
Despite limited access to debt, M&A deals are not slowing down. Volume will likely continue to rise further as buyers’ and sellers’ expectations match up. We see 2011 becoming a healthy M&A market and forecast the number of deals announced and valuations will rise further.
There were 421 venture investments in 2010, worth a combined $6.1 billion. Compared to 2009, investment activity, in 2010 in the Marketing, Information and Digital Media/Commerce industries grew by 22 percent, while investment transaction value increased by 43 percent. Aside from Groupon’s year-end raise, the biggest deal this quarter was Twitter’s $200 million growth capital financing led by Kleiner Perkins Caufield & Byers.
IPO’s More Active in 2011
In all, 110 U.S. companies went public last year valued at $35 billion, according to Dealogic. And that figured was skewed by GM which accounted for nearly half the volume. Still the number of U.S. companies that went public last year was double what was seen in 2009. The number of PE firms looking to exit investments should keep the IPO market busy. Already, more than 40 PE-owned companies have filed to go public this year.
There were only 18 media companies who filed for an IPO in 2010. Hulu appears to be holding off on its IPO, while Everyday Health canceled its planned filing in November. Despite the roadblocks surrounding IPOs in the media space 2011 should be a much bigger year for IPOs. As the stock market improves, some big-name digital companies will finally go public in 2011, including: Demand Media, Glam Media, Zynga, Pandora, Groupon, Brightcove and LinkedIn.
For the full report, go to: Q4 2010 - Digital Media Update
Generation Equity Advisors, LLC is an independent investment banking firm focused exclusively on the Software, IT Services and Digital Media industry sectors.
For more info on Generation Equity Advisors, go to: Generation Equity Advisors
