February 23, 2015 TRANSACTION VALUE EXPERIENCES STRONG GAINS IN THE INFORMATION INDUSTRY

According to Berkery Noyes’ Information report for full year 2014, there was an eight percent increase in deal volume, with a total of 3,954 transactions over the past year. Deal value in the Information Industry gained 38 percent on a year-to-year basis, from $162.54 billion to $224.44 billion. The industry’s median revenue multiple saw an uptick from 2.1x in 2013 to 2.3x in 2014, while the median EBITDA multiple moved slightly from 11.2x to 11.0x.

Regarding the three horizontal markets in the report, volume in the Media & Marketing portion of the Information Industry remained nearly constant. However, its value increased 22 percent, from $75.22 billion to $91.45 billion. Of note, the Marketing segment’s value more than tripled over the past year. There were four Marketing transactions above $2 billion in 2014, compared to one such deal in 2013. 

The Online & Mobile horizontal market underwent a 12 percent increase in volume between 2013 and 2014. As for the mobile application subsector, deals in the business-to-business subsector improved 18 percent, from 193 to 228. Transactions involving consumer applications increased eight percent, from 217 to 234. 

In terms of high profile Online & Mobile transactions, there were several notable deals involving real-time bidding (RTB) technology. This included Data’s acquisition of Conversant for $2.34 billion and Millennial Media’s acquisition of Nexage for $108 million. Major acquirers were active in the online real estate information marketplace as well, such as Zillow’s acquisition of Trulia for $2.91 billion and News Corp’s acquisition of Move, which operates Realtor.com and other websites, for $950 million.

As for the Software horizontal, deal activity improved 14 percent throughout the past twelve months. Four of the horizontal’s top ten highest value deals in 2014 occurred in the Business Software segment, which is software designed for general business practices and not specific industry markets. This made it the best represented Software segment in the top ten list. In addition, two of the Software horizontal’s top ten largest deals were backed by private equity firms, both of which occurred in the Business Software segment. This consisted of Vista Equity Partners’ acquisition of TIBCO Software for $4.11 billion and Thoma Bravo’s acquisition of Compuware Corporation for $2.05 billion.

“There are many motivated acquirers competing for good properties at the moment,” said James Berkery, Chief Information Officer at Berkery Noyes. “Buyers are usually attracted to companies that can demonstrate a high growth rate, strong margins, good free cash flow, and a diversified customer base, among other factors. Although careful not to overpay, they are sometimes willing to stretch to a premium price when they have a valid, compelling and strategic reason to do so.” Berkery continued, “Along with maintaining confidence in the fundamentals of the market, this helps to explain the general upward trend in median enterprise value multiples in the Information Industry over the past several years.”