NEW YORK — July 16, 2012 — Berkery Noyes, an independent mid-market investment bank, today released its first half 2012 mergers and acquisitions trend report for the Financial Technology and Information Industry.
The Financial Technology report analyzes M&A activity for the first half of 2012 and compares it with activity in the four previous six-month periods. This market includes information and technology companies in Capital Markets, Payments, Banking, Insurance, and other related financial services.
Total volume in first half 2012 decreased five percent compared to second half 2011. However, total transaction value increased 24 percent. The median revenue multiple, meanwhile, improved from 2.3x to 2.7x.
According to John Guzzo, Berkery Noyes Managing Director, “It may appear obvious that in general, the greater the EBTIDA margins, the higher the revenue multiple. However, there are instances when margins are so high that Buyers find minimal margin expansion post-acquisition and discount the revenue multiple accordingly. Our research has shown Companies with EBITDA margins of over 40 percent do not always receive higher revenue multiples. Nonetheless, for the period 2010 through the first-half of 2012, as illustrated in Figure 4., revenue multiples consistently increased in tandem with higher margins, reflecting a more robust level of interest in best of breed, highly-profitable businesses.”
The Payments segment experienced a 30 percent volume increase compared to first half 2011. The most active associated buyer during the last two and a half years was VeriFone, a provider of point-of-sale electronic payments solutions, with six transactions. “Demand in emerging markets, regulations, and mobile payments technology are heavily influencing growth projections,” stated Peter Ognibene, Managing Director at Berkery Noyes. “There are several other important trends occurring as well. For one thing, there’s more competition between the traditional credit card model and peer-to-peer payments schemes for online transactions. Secondly, businesses are adopting software and centralized gateways that improve the efficiency of e-commerce transactions management. There’s also strong demand for technologies to comply with requirements around digital security, identity verification, and fraud prevention.”
Transaction volume in the Capital Markets segment was nearly constant on a half-to-half year basis and remained the largest market segment in this report. One of the most active Capital Markets acquirers in first half 2012 was The McGraw-Hill Companies with three transactions, two of which were completed by its subsidiary S&P Capital IQ. McGraw-Hill’s acquisitions of Coalition Development Ltd, Quant House, and R2 Financial Technologies underscore the interest in risk management and analytics solutions that are targeted to traders, portfolio managers, and other investment professionals. In addition, two electronic exchanges made acquisitions in the governance, risk, and compliance (GRC) space. This consisted of NYSE Euronext’s announced acquisition of Corpedia Corporation and NASDAQ OMX’s announced acquisition of BWise.
A copy of the FIRST HALF 2012 M&A REPORT FOR THE FINANCIAL TECHNOLOGY & INFORMATION INDUSTRY is available at the Berkery Noyes website.