warning message
Name Password:  
search

News

 
 

Berkery Noyes Releases Information Industry M&A Report For Third Quarter 2014

Wednesday, October 08, 2014

NEW YORK — October 8, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2014 mergers and acquisitions trend report for the Information Industry.

The Information report features companies in the Media & Marketing, Software, and Online & Mobile Industries. It analyzes M&A activity during the first three quarters of 2014 and compares it with data for the six previous quarters.

The Information Industry experienced a 14 percent decline in transaction volume over the past three months. Of note, second quarter 2014 was the industry’s peak for volume throughout the prior seven quarters. The number of deals year-to-date also rose seven percent compared to the corresponding timeframe in 2013.

Aggregate value gained 31 percent, from $48.7 billion in second quarter 2014 to $63.9 billion in third quarter 2014. In terms of valuations, the industry’s median revenue multiple from 2013 through the first three quarters of 2014 experienced an uptick from 2.1x to 2.4x, while the median EBITDA multiple moved slightly from 11.2x to 11.0x.

The largest transaction in third quarter 2014 was SAP’s acquisition of Concur Technologies, a provider of travel and expense management solutions, for $7.6 billion. This followed SAP’s acquisition earlier in the year of Fieldglass, a provider of vendor management software that helps companies manage contingent labor. SAP has completed several notable cloud-based acquisitions in the workforce management space over the past few years, such as Ariba for $4.4 billion in 2012 and SuccessFactors for $3.3 billion in 2011.

As for the horizontal markets in the report, volume in the Online & Mobile component of the Information Industry fell 12 percent in third quarter 2014. However, when compared to the first three quarters of 2013, Online & Mobile transaction volume year-to-date rose nine percent.

Deal flow across the entire Software market, after increasing 16 percent from first to second quarter 2014, declined 12 percent in third quarter 2014. Regarding specific growth areas, the Infrastructure Software segment underwent a nine percent rise. The segment’s most active acquirer year-to-date was Cisco Systems with four transactions. The company’s largest deal thus far in 2014 was its second quarter acquisition of Tail-f Systems, a provider of configuration management and network automation software, for $175 million. In contrast, Cisco’s highest value deal in 2013 was its acquisition of Sourcefire for $2.7 billion in the cyber-security subsector.

Transaction volume in the Media & Marketing horizontal experienced an 11 percent quarterly decrease. Meanwhile, the number of deals in the Internet Media segment increased five percent throughout the past three months. There were several notable real estate information deals in the Internet Media segment in third quarter 2014. This included Zillow’s acquisition of Trulia for $2.6 billion and News Corp’s acquisition of Move, which operates Realtor.com and other websites, for $900 million.

In addition, there were several other segments of the Information Industry that showed growth on a quarter-to-quarter basis. This included a 32 percent rise in volume in the Healthcare IT market. The largest Healthcare IT transaction in third quarter 2014 and year-to-date was Cognizant’s acquisition of TriZetto in for $2.7 billion.

“There appears to be sufficient momentum to drive steady improvement across the information spectrum,” said James Berkery, Chief Information Officer at Berkery Noyes. “Companies that have shed non-core assets, rationalized their revenue mix around high-margin products, and maintained investment in new products and processes are well positioned for growth.” Berkery continued, “Given the favorable economic climate, large strategics in general are finding it easier to strengthen their balance sheets, improve earnings, and generate cash to invest in core business activities. Some strategic players will use the cash to retire their debt. However, a good cash position and strong stock prices will make others more likely to seek acquisitions that can provide new customers, new technologies or access to new markets, and these often entail niche businesses that bolt on or tuck into existing operations.”

A copy of the INFORMATION INDUSTRY M&A REPORT FOR THIRD QUARTER 2014 is available at the Berkery Noyes website.