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Berkery Noyes Releases Online and Mobile Industry M&A Report For Third Quarter 2015

Wednesday, October 07, 2015

NEW YORK — October 7, 2015 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2015 mergers and acquisitions trend report for the Online and Mobile Industry. The report analyzes M&A activity during the three-month period and compares it with data for the six previous quarters.

Total volume declined seven percent on a quarterly basis, from 713 to 663 transactions. Aggregate value fell 17 percent, from $45.5 billion to $37.7 billion. When compared to the first three quarters of 2014, the number of deals year-to-date rose 15 percent while value remained about constant.

Transaction volume in the SaaS & Cloud segment decreased ten percent from the second to third quarter but increased 24 percent on a year-over year basis. In terms of valuations, SaaS & Cloud had the industry’s highest median enterprise value multiples thus far in 2015 at 2.8x revenue and 12.2x EBITDA.

M&A activity in the E-Commerce segment decreased seven percent relative to the second quarter. However, this represented an eight percent rise year-to-date compared to same time period in 2014. The largest E-Commerce deal in third quarter 2015 and year-to-date was home shopping channel QVC’s acquisition of Zulily, an online retailer that primarily serves millennial moms, for $2.1 billion. Traditional retailers have also been looking to strengthen their online presence by making acquisitions with a focus on the millennial market. For example, department store chain Nordstrom completed a related deal in 2011 with the acquisition HauteLook, which offers flash discount sales, for $180 million.

Other notable E-Commerce transactions during third quarter 2015 included a private equity consortium’s acquisition of eBay Enterprise, a provider of commerce technologies and ominchannel operations, for $925 million; Yahoo!’s acquisition of Polyvore, a social commerce website with active fashion, beauty, and interior design communities, for $230 million; and PayPal’s acquisition of Modest, a mobile commerce platform, which was PayPal’s first deal since splitting from eBay and becoming a standalone public company in July.

As for the E-Marketing & Search segment, volume fell 14 percent, returning to its first quarter level. Transactions in the segment by notable acquirers in the third quarter included News Corp’s acquisition of Unruly Limited, a social video advertising company, for $90 million; Oracle’s acquisition of Maxymiser, which provides marketers with A/B testing and other personalization tools; and LinkedIn’s acquisition of Fliptop, a predictive analytics firm.

“As the decline in print advertising continues, we’re seeing certain publishers become acquisitive in the ad tech sector,” said Vineet Asthana, Managing Director at Berkery Noyes. “Programmatic buying, native advertising, and retargeting presents an opportunity for the traditional media players to reach their audiences on a variety of platforms. Moreover the ad tech space is getting crowded and should be ripe for consolidation moving forward. Acquirers in the middle market seem to be especially keen on picking up digital companies that have either a regional focus or differentiated technological offerings.”

The number of mobile application deals, after remaining about constant from first to second quarter 2015, declined 13 percent in the third quarter with a total of 96 transactions. High profile acquirers in the mobile space during the third quarter included Adidas’ acquisition of Runtastic, a fitness tracking application, for $239 million; Accenture’s acquisition of Chaotic Moon Studios, a mobile software design and development studio; and Snapchat’s acquisition of Looksery, a face tracking and modification application, for a reported $150 million. In addition, following its acquisition by Verizon for $4.1 billion earlier in the year, AOL completed three mobile related transactions during the third quarter. This consisted of Millennial Media, a mobile advertising company with a focus on programmatic technology, for $218 million; Ashe Avenue, a web development and design group that builds mobile applications; and Kanvas, which creates social photo and messaging mobile applications.

Transaction volume in the Communications segment improved 42 percent in the third quarter, from 52 to 74 deals. One notable acquirer was Blackberry with the acquisition of Good Technology, a mobile security solutions business, for $425 million. Blackberry completed another industry deal in the first quarter with the acquisition of WatchDox, an enterprise document security company. This continues a steady pace of M&A activity for the smartphone manufacturer, as indicated by its 2014 acquisitions of Secusmart, a security voice and data encryption company; and Movirtu, a provider of virtual identity solutions. Regarding other high profile segment acquirers in third quarter 2015, Turner Broadcasting Systems acquired iStreamPlanet, which provides cloud-based video streaming technology, for $200 million; and Amazon Web Services acquired Elemental Technologies, a supplier of software-defined video solutions and over-the-top TV (OTT) content delivery.

A copy of the ONLINE AND MOBILE INDUSTRY M&A REPORT FOR THIRD QUARTER 2015 is available at the Berkery Noyes website.