The Information Industry report is defined by Berkery Noyes as covering all Media and Marketing, Software, and Online and Mobile companies. It analyzes M&A activity during the first three quarters of 2012 and compares it with data for the six previous quarters.
The Information Industry underwent a 10 percent decline in transaction volume, while transaction value increased 14 percent. At the same time, the median revenue multiple increased from 1.4x in second quarter 2012 to 2.1x in third quarter 2012. This was the highest median revenue multiple recorded in the Information Industry since third quarter 2011.
The firm’s research shows that there was a similar quarter-to-quarter transaction volume decline preceding the last two presidential elections. M&A activity decreased 13 percent from second to third quarter 2004 and 22 percent from first to second quarter 2008, before the peak of the financial crisis. These temporary slowdowns may have been partially attributable, in all three instances, to uncertainty regarding future tax rates and regulations. Likewise, this indicates that there could be the potential for a rebound in M&A levels by the beginning of 2013. “Companies with strong balance sheets are still looking for technology and talent, and low interest rates are contributing to a favorable environment for borrowers looking to pursue acquisitions,” stated Joseph W. Berkery, Chief Executive Officer of Berkery Noyes.
One area in the report that experienced strong growth involved geographic information system (GIS) technology. Combined volume in the GIS, geography, geospatial, and geolocation sectors improved 50 percent on a quarterly basis. The largest related transaction in the last two years, DigitalGlobe’s announced merger with GeoEye for $900 million, occurred in third quarter 2012. GIS has also evolved from powerful desktop modeling solutions to maps that are able to support new technologies. As an example of such software transactions in third quarter 2012, Amazon.com acquired UpNext, Esri acquired GeoIQ and Maptel, and TerraGo Technologies acquired Geosemble.
The U.S. Census Bureau’s digital geographic database, known as TIGER (which stands for Topologically Integrated Geographic Encoding and Referencing), has made it easier for companies with GIS software to utilize public data made accessible by the government. In addition, following the release of iOS 6, Apple is looking to improve its mapping platform in order to compete against Google Maps. This could help foster an environment where the tech leader and others, aside from recruiting efforts, consider pursuing acqui-hires of GIS software development talent.
On a related note, M&A in the Transportation segment of the Information Industry – which primarily includes software and technology companies that serve the trucking, shipping, logistics, and navigation sectors – more than doubled in transaction volume from first to second quarter 2012 and experienced an 80 percent increase compared to third quarter 2011.
A copy of the INFORMATION INDUSTRY M&A REPORT FOR THIRD QUARTER 2012 is available at the Berkery Noyes website.