Digital Media M&A Update - Q4 2011 and 2012 Outlook
Q4 2011 – Global M&A Update
According to MergerMarket, global
M&A for 2011 totaled $2,178.4 billion,
up 2.5% from the same period in 2010
($2,125.9 billion), making it the busiest year since 2008 (which was at $2,405.8
billion). 12,455 deals were announced in 2011, 1.3% below the number for 2010 (12,296 deals).
Activity did,
however, decrease over four successive quarters, with $432 billion-worth of deals announced globally in Q4 2011, down 22.5% from Q3 2011 ($557.5 billion). Fourth quarter activity was 39%
lower than in Q4 2010 (US$ 708.1bn), with the lowest quarterly total since Q3
2009 (US$ 325.4bn).
2011 was the busiest year for cross-border
M&A
since 2008, in spite of a gradual
slowdown in M&A activity after the first half of the year. Cross-border deals (by individual
countries) announced in 2011 added
up to $874.4 billion and regional
cross-border deals were up to $593 billion, an increase of 9.8% and 19.6% respectively since 2010, which saw
$796.7 billion-worth by country and $495.7 billion-worth by region. 2011 booked cross-border deals between individual countries accounting for 41.5% of global M&A activity, the
second highest proportion since 2007 when $1,564.4 billion-worth accounted for
42.8%.
According to
The 451 Group, acquirers spent $219 billion by purchasing 3,690 information technology,
telecommunications and Internet companies around the world in 2011—a 17% increase in spending and a 13% increase in number of deals
year-over-year.
The total
dollar value increase was led by multibillion-dollar strategic deals from top-tier
technology companies such Hewlett
Packard (HP), Google, Microsoft, SAP and Texas Instruments. Mega
deals included Microsoft’s $8.5
billion purchase of Skype, Google’s $12.5 billion successful bid
for Motorola Mobility patents, Texas Instrument’s $6.5 billion
acquisition of National Semiconductor,
HP’s buyout of Autonomy for $11.7 billion, and SAP spending $3.65 billion to acquire human capital management
software vendor SuccessFactors.
It was also noted
that the Media, Information, Marketing Services
and Technology sectors in the U.S. booked
nearly 900 transactions in 2011 totaling $47 billion, a 9% increase over 2010.
Emerging market (BRIC) buyout activity, valued at
$32.3 billion, accounted for 11.6% of
global buyout activity in 2011, up from 11.5% in 2010, and the highest
contribution since 2009 (19.1%). Europe
is the region that invested the most in the emerging markets in 2011,
accounting for 40.2% of cross-border deal value ($80.4 billion): the UK,
France, Germany and the Netherlands accounting for 21.1%, 17.6% and 9.6% (for
both Germany and the Netherlands) of European-related inbound deal value
respectively.
The global average deal size for Q4 2011 was
$291 million, the lowest Q4 average since 2007 (at $277m).
Cash-only was the preferred structure for
cross-border deals in Q4 2011, with cash-only deals accounting
for approximately 94% of the value
of all cross-border deals announced in Q4 2011, compared with 90% in Q3 2011.
In all,
technology acquirers increased M&A spending for the second year in a row.
Moreover, total deal count hit its highest level since 2006, as M&A
activity across sectors and across value continues to rebound from the downturn
of the 2008-2010 recession.
Multiples and Deal Premiums
The average premium (one day before) of
global M&A deals for publicly listed companies in Q4 2011 increased to 33.5%, driving the annual average up to
28.5%, up from 22.2% in 2010. North
American premiums averaged 35.9% in 2011, an increase from 31.6% in 2010.
Meanwhile, European premiums for the
year averaged 21.9%, the second highest average since 2002, only topped by
2008’s average of 22.9%. The Asia-Pacific region saw an average premium of 21
%, again the highest average premium since 2008 (24.1%).
The average EBITDA multiple across global
M&A in 2011 was 12.6x, down from 14.9x in 2010 and the lowest average
since 2003 (10.6x). The European average
EBITDA multiple in 2011 was 12.1x, the second-lowest since 2004, and 11.5x
in 2009.
The
quarterly average global EBITDA multiple decreased in the last quarter of the
year to 12.1x, from the previous quarter’s 15.8x, a drop driven by significant
decreases in North America and Asia-Pacific, from 16.3x in Q3 to 12.8x in Q4 in North America, and from 20.4x to 10.1x in Asia-Pacific. Europe, however, showed an increase in the average EBITDA multiple
on M&A deals in Q4 2011 to 15.3x,
up from 14.4x in Q3 2011.
The TMT (Technology, Media & Telecoms)
sector recorded the highest average EBITDA multiple – at 15.7x – in 2011, overtaking 2010’s
leading sector Energy, Mining & Utilities which averaged 19.5x.
Digital
media M&A
Recent announced M&A
Transactions in the Digital Media sector for Q4 2011 and YTD 2012 include:
•
RIM acquires NewBay for $100 million at approximately
5.0x LTM Revenues
•
Yahoo acquires Interclick for $270 million at 2.0x LTM
Revenues
•
Rakuten acquires Kobo for $315 million
•
Facebook acquires Gowalla (undisclosed)
•
Google acquires Apture and Katango (undisclosed)
•
Evolve Media acquires RealityTea.com, WebEcoist.com (Jan 2012)
Note: Full
M&A table on Page 8
The
sectors with the largest disclosed
median enterprise value multiples for all of 2011 were Broadcasting with 3.8x revenue and Internet Media at 17.5x
EBITDA.
The
median revenue multiple rose from
1.5x in 2010 to 1.9x in 2011. The median EBITDA multiple moved slightly
from 10.4x in 2010 to 10.6x in 2011.
The sector
with the largest increase in volume in
2011 over 2010 was Online Marketing
with a 29% increase from 332
transactions in 2010 to 428 transactions
in 2011.
2012 M&A Outlook
We expect
M&A activity to remain steady for 2012 and possibly uptick further if the
lending environment eases globally.
While Europe is in economic turmoil, the U.S. is stabilizing. Emerging markets such as Brazil, Argentina
and China are all on the upswing and in growth mode. We expect some financial buyers (private
equity) to remain on the sidelines while strategic buyers (companies) will
acquire to capture growth.
Buyout firms accounted for around 16 percent of
company takeovers in 2011.
Volatile
equity markets slowed mounting U.S. deal activity in the third and fourth
quarters, following growing deal momentum in the first two quarters of
2011. In light of concerns over Europe
and a pullback in financing, U.S. merger and acquisition activity in the second
half of 2011 was driven by well-prepared dealmakers focused on executing
acquisitive growth strategies and availability of businesses with strong
fundamentals– a key trend expected to continue into 2012, according to PwC's Year-End U.S. M&A Outlook.
Sellers now are
looking for both speed and certainty in a deal, and also pursuing various
alternative options and scenarios as they proceed as a way of maximizing the
asset’s value. With sellers in the driver's seat, buyers must remain poised and
ready when deal negotiations continue for a prolonged timeframe. Overall, the M&A markets are on track
to stabilize further and increase overall over the next few years.
As for the Facebook IPO, it is planned to go out
between April and June 2012 and will raise around $10 billion at a $100 billion
valuation, according to Bloomberg
news sources. Facebook’s revenue more
than doubled to $4.27 billion 2011 from $2 billion in 2010, research firm EMarketer Inc. said.
M&A TABLES AVAILABLE IN FULL REPORT
Generation Equity Advisors, LLC is
an independent investment bank and M&A advisory firm focused exclusively on
the global Software, IT Services and Digital Media industry sectors. We
advise buyers and sellers of companies and efficiently execute transactions to
increase shareholder value. Our professionals have advised on $20+ billion in
M&A transactions to date and have current relationships globally with
technology and media companies as well as leading private equity firms.
Aaron Solganick
President & Managing Director
+1 (310)
689-7370
Chad Gardiner
Vice
President
+1 (310)
689-7371
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Associate
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969-3928
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular company, individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We perform our own research and also use third party research. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This is not an offer or recommendation to buy or sell securities nor is it a recommendation to merge, acquire, sell or exit a specific company or entity.
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