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Berkery Noyes Releases Information Industry M&A Report For Third Quarter 2016

Thursday, October 13, 2016

NEW YORK — October 13, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2016 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 2016 and compares it with data for the six previous quarters.

Deal volume in the Information Industry declined nine percent over the past three months. Aggregate value lost five percent, from $94.6 billion to $89.4 billion. On a year-over year basis, volume remained about constant while value gained 31 percent.

As for the horizontal markets in the report, volume in the Online & Mobile component of the Information Industry decreased 11 percent and value fell 23 percent during the third quarter. When compared to the first three quarters of 2015, Online & Mobile volume year-to-date was flat while value rose 30 percent.

Deal flow across the Software horizontal fell nine percent on a quarterly basis. However, value gained 43 percent. Software volume year-to-date improved two percent and value increased 36 percent relative to the corresponding period in 2015. Also of note, three of the Software horizontal’s top five largest deals thus far in 2016 occurred in the third quarter.

M&A activity in the Infrastructure segment stayed nearly constant for the third consecutive quarter. Regarding high profile Infrastructure transactions in the third quarter, LogMeIn announced its merger with Citrix GoTo, a family of products delivers collaborative communication solutions for small and medium sized businesses, for $1.8 billion (note that this transaction is structured as a Reverse Morris Trust, which is a tax-free deal in which one company merges with a spun-off unit); Avast Software announced its acquisition of AVG Technologies, a developer of business, mobile and PC device security software applications, for $1.3 billion; Intel announced its sale of a majority stake in its cybersecurity business to TPG Capital for $1.1 billion; and Google announced its acquisition of Apigee, an API management platform, for $625 million.

Meanwhile, Apple has been a notable acquirer and continued to show interest in machine learning companies. In the third quarter Apple acquired Turi, which provides a machine learning platform that enables data scientists and developers to create intelligent applications. This followed Apple’s first quarter acquisition of Emotient, an artificial intelligence company that detects emotions by analyzing facial expressions. Apple also acquired machine learning startups Perceptio and VocalIQ in 2015.

Transaction volume in the Media & Marketing horizontal decreased seven percent over the past quarter. Upon examination of value, none of the overall industry’s top ten largest deals year-to-date were Marketing related. The highest value Marketing deal in the third quarter was Dentsu’s announced acquisition of a majority stake in Merkle, a data marketing firm that specializes in customer relationship management, for $1.5 billion. The New York Times, through its brand marketing unit T Brand Studio, was a high profile acquirer in the segment during the quarter as well with the acquisition of Fake Love, which specializes in live experiences and experiential marketing. Moreover, The New York Times made a move in the segment earlier this year with the acquisition of HelloSociety, a digital marketing firm that helps brands drive engagement across multiple social media platforms.

There were also several vertical market segments of the Information Industry that showed growth on a year-over-year basis. This included a seven percent rise in volume in the Financial Technology market. Three of the Financial Technology vertical’s top five highest value deals year-to-date involved major exchanges in the Capital Markets segment.

“The pace of M&A in the middle market has been steady for the most part, with both mature and high growth companies attracting interest,” said James Berkery, Managing Partner at Berkery Noyes. “Strategic acquirers are actively seeking opportunities to extend their vertical expertise, add value to their existing offerings, and improve their ability to retain customers. Berkery continued, “Valuations have remained relatively stable given the amount of cash looking to be deployed from strategic and financial acquirers alike. Certain high growth sectors will remain valued at a premium, with multiples that make those deals mainly strategic in nature, while more mature sectors and companies will continue to find interest from both financial sponsors and strategic consolidators.”

A copy of the INFORMATION INDUSTRY M&A REPORT FOR THIRD QUARTER 2016 is available at the Berkery Noyes website.