NEW YORK — January 16, 2013 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2012 mergers and acquisitions trend report for the Financial Technology and Information Industry.
The report analyzes M&A activity for the sector during 2012 and compares it with data covering 2010 and 2011. This market includes information and technology companies in Capital Markets, Payments, Banking, Insurance, and other related financial services.
Transaction volume underwent a seven percent increase over the past twelve months, from 282 transactions in 2011 to 302 transactions in 2012. Moreover, transaction value rose from $19.84 billion to $30.23 billion, an increase of 52 percent. The median revenue multiple improved from 2.6x to 2.9x, while the median EBITDA multiple increased from 11.5x to 11.9x.
IntercontinentalExchange’s announced acquisition of NYSE Euronext for $10.19 billion was the largest 2012 transaction covered in the report. Regulators blocked several bids for NYSE Euronext in 2011, including a proposed merger with Deutsche Börse Group for $12.39 billion. The number of transactions in the Capital Markets segment decreased nine percent relative to 2011, which was similar to its 2010 volume.
“Algo trading software solutions present an opportunity for firms to improve execution quality and achieve higher commissions,” said Peter Ognibene, Managing Director at Berkery Noyes. “There is also a push towards more transparency around high frequency trading to prevent flash crashes and similar incidents. Likewise, with the transformation of the derivatives market by regulations such as the Volcker rule, technology companies in the capital markets sector are still facing some elements of lingering uncertainty.” Ognibene continued, “Businesses that are taking steps to adapt to the changing capital markets landscape are well situated to continue generating a healthy level of interest from acquirers.”
M&A activity in the Payments segment improved at a robust pace in 2012, rising 47 percent from 2011. With this growth, Payments had a slight edge over Capital Markets as the most active segment in the report on a year-to-year basis. In addition, four of the industry’s top ten highest value deals fell within the Payments segment, compared to two in 2011. These four transactions, with a combined value of $5.83 billion, represented 19 percent of the industry’s 2012 aggregate deal value.
According to John Guzzo, Managing Director at Berkery Noyes, “There are significant changes occurring in the payments sector, which is drawing heightened attention from both strategic and financial acquirers. This includes the creation of enterprise payments hubs that can lower processing costs, as well as the more extensive use of mobile payments systems.”
Guzzo added, “Heightened regulatory scrutiny and new legislation – particularly the CARD Act and Durbin Amendment – is also starting to have an impact on the sector, as new reporting and record keeping requirements come into effect. Some payments companies, responding in part to these regulations, will look to diversify their revenue streams by launching new products and services.”
Deal flow in the Banking segment rose six percent relative to 2011. One evolving aspect of M&A in the segment, as highlighted by MasterCard’s acquisition of Truaxis, is interest in automated loyalty marketing solutions that are being implemented by financial institutions. “From a commercial business standpoint, paper-to-electronic conversion and mobile check depositing for corporate customers is having a noticeable impact on the banking market,” stated Managing Director Peter Ognibene. “Furthermore, with the proliferation of data over the past few years, software solutions focused on credit, loan, and deposit analysis are gaining in popularity.”
A copy of the FINANCIAL TECHNOLOGY AND INFORMATION INDUSTRY M&A REPORT FOR FULL YEAR 2012 is available at the Berkery Noyes website.