Monday, February 2, 2015

Internet and Digital Media M&A Update (January 2015)

Merger & acquisition deal values in digital media, information & technology rose 48% in 2014 compared with 2013. The aggregate total value of announced M&A deals rose to $224 billion in 2014 from $151 billion in 2013. There were approximately 2,240 acquisitions announced in digital media, information & technology last year -- up from 2,020 in 2013 -- and activity should continue to pick up in 2015.

Agency & marketing, information and digital content were the top three most active sectors last year, remaining steady from 2013 and 2012. Software, mobile, and digital content provided higher exit valuations in 2014. Announced deals in software represented $48 billion or 21.7% of the total -- up from $27 billion and 17.7% in 2013 -- followed by mobile, digital content and information, evenly distributed and each accounting for between 17.8% and 15.0% of the total.

Facebook's WhatsApp acquisition for $19.7 billion substantially increased the value of mobile M&A’s. While WhatsApp represents the largest deal, there were 48 M&A transactions above $1 billion in deal value last year, accounting for 61.9% of total reported deal value, compared with 34 transactions in 2013, accounting for 59.2% of total deal value. There were 28 deals in search and digital media sectors that included search, search engine optimization or paid-search marketing, and 178 deals categorized as digital agencies.

Google, Yahoo, Publicis, and WPP Groupe were the most active acquirers in 2014.

Overall, 2014 was an active year in the advertising technology sector, with 100 M&A transactions representing $7.5 billion in value, more than 3x the value of deals in 2013. Publicis Groupe's acquisition of digital agency Sapient for $3.7 billion was announced in November 2014. With advertisers wanting to use fewer vendors, we expect to see an increase of M&A activity around larger companies looking to gobble up smaller ones with specific services, as they attempt to become full-service providers.

The largest ad tech deal in 2014 was Alliance Data's $2.4 billion acquisition of Conversant, formerly known as ValueClick, an affiliate marketing firm that enables companies to personalize ads and target users based on previous Internet searches. Conversant's technology will become an extension of Alliance Data's loyalty marketing services capabilities.

Yahoo’s $640 million acquisition of video ad provider BrightRoll (Nov 2014) was another move into video advertising.

M&A will not slow in 2015. We see all of the economic elements for a strong M&A marketplace for 2015: an improving economy, strong balance sheets, low interest rates, current IPO filings and a rising stock market.

For the complete report go here: Internet and Digital Media M&A Update (January 2015)