Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. www.harriswilliams.com TECHNOLOGY, MEDIA & TELECOM QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze, and Mr. Aadil Khan, authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
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Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co.is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.
www.harriswilliams.com
TECHNOLOGY, MEDIA & TELECOMQUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
www.harriswilliams.de
Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales undercompany number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze, and Mr. Aadil Khan, authorised and regulated by the Financial Conduct Authority.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its businessaddress at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
HARRIS WILLIAMS & CO. INTERNET & DIGITAL MEDIA (IDM) OVERVIEW
2
SECTION CONTENTS
SELECT HW&CO. INTERNET & DIGITAL MEDIA TRANSACTIONS
Harris Williams & Co.’s Technology, Media & Telecom (“TMT”) Group is dedicated to providingsuperior merger & acquisition and capital markets advisory services to market leading companies.We are pleased to issue the 3Q 2016 Internet & Digital Media Sector Update, which providescommentary and analysis on the current IDM M&A environment and market trends.
ABOUT THE SECTORPrimary IDM Contact
Mike WilkinsManaging Director575 Market Street, 31st FloorSan Francisco, California 94105Office: 415.217.3411Mobile: [email protected]
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
WHAT WE’RE READING
3
DOUBTS ABOUT DIGITAL ADS RISE OVER NEW REVELATIONS (SEPTEMBER 23, 2016)
In recent months, several significant revelations have further called into question the integrity of both reported advertising data and the reporting party: the revelations that Facebook overestimated the average time spent watching video ads on its platform by up to 80%; that Denstu overcharged at least 111 companies for internet ads; and that ad agencies may have accepted rebates from media companies without informing clients. These developments have all served to compound a mounting concern: that marketers are wasting billions of dollars on digital advertising. In light of this concern, calls for greater accountability and transparency have resounded amongst ad buyers, with some voicing support for broader third-party verification. Without a standardized currency on which to base performance, buyers are struggling to be able to judge the efficacy of their campaigns, and as decisions around budget allocation are further contemplated, the trumpeted value of digital advertising is being re-assessed by some.
The Wall Street Journal
Verizon is stepping up a $10 billion effort to build out its digital media business. The telecom giant’s apparent plan is to acquire, develop, and distribute creative content, while using the vast data collected from mobile phones to offer highly targeted advertising to its tens of millions of users. In so doing, Verizon is hoping to present itself as a strong contender to Facebook and Google as the three vie for advertising dollars—leveraging the diverse assets gained through Verizon’s notable acquisitions of AOL and Yahoo. The company’s digital media push comes in the midst of a 5% quarterly decline in revenue despite a 44% surge in smartphone data usage, signaling heightened competition in the sector. Indeed, collective performance has plateaued across the wireless industry, prompting other carriers to similarly seek out new avenues of strategic reinvention.
The Wall Street Journal
INSIDE VERIZON’S GAMBLE ON DIGITAL MEDIA (AUGUST 2, 2016)
HOW ARTIFICIAL INTELLIGENCE IS CHANGING ONLINE RETAIL FOREVER (OCTOBER 11, 2016)
Artificial intelligence (“A.I.”) is beginning to demonstrate a potentially transformative impact on online retail. Though the full implications of the technological trend for the sector have yet to be determined, its benefits are already becoming tangible. Even now, there are areas where A.I. is showing the ability to plug seamlessly into retailers’ existing online infrastructure and provide immediate value for businesses and consumers alike. As the applications of A.I. evolve, the purchasing lifecycle from product discovery to the logistics of delivery will be meaningfully impacted—providing early-adopters with clear advantages over those who choose to ignore its utility, while simultaneously introducing consumers to a new chapter of eCommerce, one that is increasingly more personalized and intuitive.
TechCrunch
HOW THE MEDIA WILL RISE IN THE FACE OF THE DIGITAL REVOLUTION (JULY 28, 2016)
Despite suffering a continued downturn since 2007, broadcasters and publishers may have cause for optimism in the near term. It is no secret that the ‘digital age’ has beset many media institutions with a series of challenges—declining advertising revenue brought on by channel proliferation, shifting consumer preferences in favor of ‘short-form’ content, heightened overall competition resulting from decreased barriers-to-entry, and others. However, several new developments are nevertheless believed to be signs of industry revitalization: newspaper digital readership has increased significantly amongst younger viewers, subscription models are demonstrating staying power with a growing number of online subscribers, and monetized social media content has the potential to powerfully augment existing advertising revenue streams. For some publications who have struggled to adapt to digital, the past few years have been unkind. Yet, for those who have proactively reconfigured themselves, the future may be brighter than previously thought.
TechCrunch
The contrasting narratives of Twitter and Snap illuminate recent dynamics in Silicon Valley M&A and valuation. Over time, as Twitter’s potential sale played out on a public stage, speculations regarding the various causes for the slow cooling of buyer interest began to center upon several issues, with one key issue amongst all: user growth. For Twitter, though revenue has more than tripled since its IPO, user growth has waned significantly. At filing in 2013, the company posted 39% year-over-year growth whereas, in the three months ended June 30th, that number has fallen significantly to 3% year-over-year growth. On the other hand, Snap is still riding high atop its 150 million daily active users and 30% user growth rate—supporting a potential valuation of $25 billion. The careful cultivation of momentum at Twitter, once valued at $40 billion, no longer sustains the company and, as observers continue to parse the company’s recent M&A difficulties, many are left to wonder if there aren’t insights to be gleaned regarding sky-high social media valuations.
The New York Times
TWITTER’S TROUBLES AND SNAP’S APPEAL: IT’S ALL ABOUT THE MOJO (OCTOBER 11, 2016)
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
Walmart’s pending acquisition of Jet.com
Jet.com operates an eCommerce marketplace that employs a unique system of pricing incentives to drive consumer spending.
The Company gained significant market share over a short period of time through an aggressive pricing strategy that was bolstered by a strong investor base and ample capital.
The investment represents a bold advancement of Walmart’s eCommerce operations as it steps up its online presence to compete with Amazon.Ent. Value: $3.3b
Revenue: est. $1.0b
EV / Revenue: 3.3x
EV / EBITDA: N/A
Announced 8/3/16
Salesforce completes acquisition of Demandware
Demandware provides enterprise-class cloud commerce solutions for retailers and branded manufacturers, including solutions for digital commerce and point of sale as well as order management and predictive intelligence capabilities.
The Company's platform offering, Demandware Commerce, is a combination of its cloud platform, community, and related services that enables customers to establish and execute complex digital commerce strategies.
The acquisition of Demandware will position Salesforce to capture the multi-billion dollar digital commerce market with the creation of the new Salesforce Commerce Cloud, which will be an integral part of its Customer Success Platform.Ent. Value: $2.7b
Revenue: $ 254m
EV / Revenue: 10.5x
EV / EBITDA: NM
Closed 7/11/16
Concur’s pending acquisition of Hipmunk
Hipmunk is a consumer-oriented online travel company providing users with hotel deals and flight results through its website and mobile application.
The Company delivers some of the most innovative functionality in the travel industry and is recognized as a leader in the cutting edge space of artificial intelligence-powered travel search and travel bots.
The acquisition of the Hipmunk team and their innovations will further Concur’s strategy to deliver consumer-grade products to corporate customers.Ent. Value: N/A
Revenue: N/A
EV / Revenue: N/A
EV / EBITDA: N/A
Announced 9/13/16
Dentsu Aegis’s pending acquisition of Merkle
Merkle operates as a customer relationship management agency that designs, executes, and evaluates integrated marketing programs.
As one of the largest independent digital agencies, Merkle manages 3.7 billion customer records across 16 offices supporting over 650 blue chip clients globally.
The acquisition will accelerate Dentsu Aegis’s strategy to become a 100% digital economy business by 2020, as well as significantly enhance their global operations.Ent. Value: $1.4b
Revenue: $436m
EV / Revenue: 3.3x
EV / EBITDA: N/A
Announced 8/8/16
Criteo’s pending acquisition of HookLogic
HookLogic provides closed-loop marketing for brand advertisers through its partnerships with leading retailers and travel companies.
HookLogic's performance marketing exchange connects many of the world's largest retail eCommerce sites with consumer brand manufacturers who vie for virtual shelf-space via sponsored product ads.
The acquisition gives Criteo access to HookLogic’s customer base and enables the integration of Criteo’s predictive bidding technology into HookLogic’s existing platform, which will help retailers to further monetize their site traffic.Ent. Value: $250m
Revenue: $111m
EV / Revenue: 2.2x
EV / EBITDA: N/A
Announced 10/4/16
SELECT IDM M&A TRANSACTIONS
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
IDM ACQUISITION ACTIVITY – STRATEGIC ACQUIRERS
MOST ACTIVE STRATEGIC ACQUIRERS OF IDM ASSETS BY VOLUME
GLOBAL STRATEGIC ACQUIRER IDM M&A ACTIVITY BY VOLUME
5
(Number of Transactions)
(Number of Transactions)
The ten most active strategic IDMbuyers over the past several yearshave completed a combined 30acquisitions in 2016 YTD.
Yahoo, alone among the group, hasnot completed an acquisition in2016, likely attributable to theinternal focus on the pendingVerizon acquisition.
Google continues to lead the packwith thirteen acquisitions in 2016 YTD,including the purchase of Apigee, aprovider of big data analytics andAPI Solutions.
3Q 2016 brings an uptick in activityover the prior quarter with strategicM&A activity increasing from 119deals in 2Q 2016 to 141 in 3Q 2016.
3Q 2016 activity represents a 18.5%increase from 2Q 2016, howeveractivity is still down 27.3% from thesame period last year.
Buyers across each vertical havetended towards assets thatenhance existing offerings /infrastructure by providing richerdata sets, stronger analytics,broader reach, and a moreexpansive solutions portfolio.
MOST ACTIVE PRIVATE EQUITY INVESTORS OF NEW IDM PLATFORMS BY VOLUME
GLOBAL NEW PLATFORM PRIVATE EQUITY IDM M&A ACTIVITY BY VOLUME
6
(Number of Transactions)
(Number of Transactions)
Vista Equity Partners has continued to be the most active private equity acquirer of new IDM platforms in 2016 YTD with the addition of four more acquisitions to make eight for the year.
Collectively, the 10 most active private equity acquirers of IDM assets executed 25 platform acquisitions in 2016 YTD.
Of note in 3Q, Vista Equity Partners closed its high profile acquisition of Marketo, a leading provider of engagement marketing software and solutions.
Private equity investment in new IDM platforms remains low in 3Q 2016 registering only 10 transactions, down 47.4% and 41.1% in the same periods in 2015 and 2014, respectively.
Continued macroeconomic uncertainty due to the U.S. presidential election and Britain’s exit from the European Union has affected deal volumes. However, PE and VC activity are expected to pick-up in 4Q 2016.
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
NOTABLE ADTECH AND MARKETING SOLUTIONS M&A TRANSACTIONS
ADTECH AND MARKETING SOLUTIONS – M&A MARKET SUMMARY
ADTECH AND MARKETING M&A VOLUME (GLOBAL) MEDIAN M&A REVENUE MULTIPLES (REPORTED)
7
(Number of Transactions) (Enterprise Value / Revenue) AdTech and Marketing
Solutions M&A deal volume fell for the third consecutive quarter in 3Q 2016.
Strategic acquirers continue to pace the market, comprising all but one of the highlighted deals for the quarter.
Despite a slight drop in deal volume, median transaction multiples increased for the second consecutive quarter, as buyers remain willing to pay premium valuations for high quality assets.
Google was a highly active acquirer in 3Q 2016, closing five transactions in the sector.
Larger transactions continued to command higher multiples, while deals valued under $100 million traded just over 1.0x revenue.
Large strategic acquirers continue to pursue comprehensive end-to-end offerings utilizing M&A to fill product gaps, while remaining disciplined as to avoid investing too early in emerging players.
Pending Orient Hongtai Investment Mgmt. AppLovin Corp. Provides mobile marketing automation and analytics for brands seeking to reach new consumers. $1,400 6.0x
Pending Dentsu Aegis Network Ltd. Merkle Group, Inc. Develops content protection and contextual advertising technology solutions. $1,433 3.3x
Pending Criteo Corp. HookLogic, Inc. Provides closed-loop marketing for brand advertisers. $250 2.2x
Pending Xaxis LLC Triad Retail Media Creates, manages, and operates online media programs for eCommerce websites. $300 0.6x
09/27/16 Vector Capital Sizmek, Inc. Provides an independent global ad campaign and distribution platform. $75 0.4x
09/14/16 salesforce.com, inc. Gravity Tank, Inc. Offers and designs innovation consultancy and integrated marketing solutions. NA NA
09/03/16 GoDaddy, Inc. ManageWP LLC Offers site a full suite of solutions for WordPress automation. NA NA
09/01/16 Ligatus GmbH (Bertlesmann SE & Co.) LiquidM, Inc. Develops a mobile advertising management platform. NA NA
08/23/16 Endurance International Group, Inc. AppMachine BV Develops and publishes mobile applications. $38 NA
08/16/16 Vista Equity Partners Marketo, Inc. Provides a cloud-based marketing software platform. $1,498 6.6x
08/16/16 Nuance Communications, Inc. TouchCommerce, Inc. Provides digital customer service and engagement solutions. $195 NA
08/09/16 Gannett Co., Inc. ReachLocal, Inc. Offers comprehensive suite of online marketing solutions for SMBs. $156 0.4x
08/09/16 Monotype Imaging, Inc. Olapic, Inc. Helps brands analyze user-generated content across multiple marketing channels. $130 NA
08/04/16 Zeta Interactive LLC Acxiom Digital, Inc. Provides integrated digital marketing solutions. $50 1.2x
07/27/16 Google, Inc. Cluster Labs, Inc. Provides mobile photo sharing applications. NA NA
07/26/16 Taboola.com Ltd. ConvertMedia Provides a recommendation engine for online marketing videos. $100 2.0x
07/19/16 Accenture Plc MobGen BV Operates a digital and mobile marketing agency. NA NA
07/18/16 Luxoft Holding, Inc. INSYS Group, Inc. Provides predictive analytics, digital marketing, and enterprise information management. $71 1.3x
07/07/16 Google, Inc. Anvato, Inc. Develops content protection and contextual advertising technology solutions. NA NA
06/30/16 Pamlico Capital Prize Logic Provides digital promotions for large consumer brands and retailers. NA NA
$156 1.7x
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
NOTABLE DATA AND INFO SERVICES M&A TRANSACTIONS
DATA AND INFORMATION SERVICES – M&A MARKET SUMMARY
DATA AND INFO SERVICES M&A VOLUME (GLOBAL) MEDIAN M&A REVENUE MULTIPLES (REPORTED)
8
(Number of Transactions) (Enterprise Value / Revenue) Data and Information Services
M&A volume remained relatively flat in 3Q 2016, but the drop was minor compared to a larger decline in the prior quarter.
The number of private equity deals remained steady at six for the quarter.
Median revenue multiples in the sector reverted to the aggregate historical median of 3.6x, in a possible cooling of investor confidence.
Transactions involving data management and analytics providers were particularly frequent this quarter relative to data collection, with buyers like eBay, Magnitude Software, and Zillow pursuing assets in the space.
The quarter was headlined by Thomson Reuters’ sale of its Intellectual Property & Science business to Onex Corporation and Baring Private Equity Asia in a divestiture valued at $3.6 billion.
Pending Google, Inc. Apigee Corp. Provides application programming interface and predictive big data analytics technology. $472 5.1x
10/03/16 Onex Corp; Baring Private Equity Asia Thomson Reuters Provides comprehensive intellectual property and scientific decision support services. $3,550 3.6x
10/03/16 Quintiles Transnational Holdings, Inc. IMS Health Holdings, Inc. Provides data and information services to the healthcare industry. $12,905 4.2x
09/30/16 Accenture Plc New Energy Group Srl Provides information technology and digital transformation consultancy services. NA NA
09/07/16 XIO Group J.D. Power & Associates, Inc. Provides marketing information, customer surveys, and consulting services. $1,100 NA
09/06/16 Frontline Technologies Group LLC Excent Corp. Develops and provides data management software solutions. NA NA
09/06/16 Lieberman Research Worldwide LLC MotiveQuest LLC Provides social market research and consulting services. NA NA
08/01/16 X.commerce, Inc. RJ Metrics, Inc. Provides analytics software for online businesses. NA NA
08/25/16 Nielsen Holding France SAS A3 Distrib SASU Provides prospectus analysis services. NA NA
08/22/16 Thoma Bravo LLC Qlik Technologies, Inc. Designs and develops business intelligence software solutions. $2,525 4.0x
08/16/16 Magnitude Software, Inc. Simba Technologies, Inc. Supplies standards-based data access and analytics solutions and data connectivity services. NA NA
08/02/16 Zillow Group, Inc. Bridge Interactive Group LLC Provides brokers and MLS's with back-office data management software. NA NA
07/25/16 Datavail Corp. Art of BI Software LLC Provides oracle analytics consulting services. NA NA
07/31/16 Axel Springer SE eMarketer, Inc. Provides marketing insight and media research, analysis, and consultancy services. $269 5.9x
07/22/16 eBay, Inc. SalesPredict SW Ltd. Develops predictive analytics solutions. NA NA
07/18/16 Luxoft Holding, Inc. INSYS Group, Inc. Provides predictive analytics, digital marketing, and enterprise information management. $71 1.3x
07/12/16 IHS, Inc. Markit Ltd. Provides information, insights, and analytics. $6,177 5.5x
07/01/16 Asset International, Inc. Factset Market Metrics & Matrix Solutions Provides market research services and customer and business intelligence solutions. $175 NA
06/01/16 Market Track LLC Channel IQ Provides online retail intelligence, channel management, and brand protection solutions. NA NA
$1,100 4.2x
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
ECOMMERCE– M&A MARKET SUMMARY
ECOMMERCE M&A VOLUME (GLOBAL)
NOTABLE ECOMMERCE M&A TRANSACTIONS
MEDIAN M&A REVENUE MULTIPLES (REPORTED)
(Number of Transactions) (Enterprise Value / Revenue) eCommerce M&A volume
rebounded this quarter, with 42 deals, representing the highest volume year to date.
Revenue multiples remainedstrong, increasing to 6.7x, apremium relative to the historicalmedian of 5.5x.
General consolidation hasmaintained across the sector aslarger companies continue toseek out accretive structuraladditions that better equip themto reach and serve an evolvingmarketplace.
Oracle’s acquisitions ofNetSuite and LogFire illustrateits continued drive to build acomprehensive suite of best-of-breed marketing andcommerce solutions.
The quarter was characterizedby several leadingeCommerce players (Etsy,Rakuten, eBay) acquiringanalytics-driven assets thathelp improve specific aspectsof backend operations.
Pending Ritchie Bros. Auctioneers, Inc. IronPlanet, Inc. Operates an online marketplace for buying and selling used heavy equipment and trucks. $740 0.9x
10/03/16 Concur Technologies, Inc. Hipmunk, Inc. Provides closed-loop marketing for brand advertisers. NA NA
09/24/16 trivago GmbH Myhotelshop GmbH Provides an online marketing shop for the hotel industry. NA NA
09/19/16 Etsy, Inc. Blackbird Technologies, Inc. Develops search and recommendation technology for eCommerce Companies. NA NA
09/19/16 Wal-Mart Stores, Inc. Jet.com, Inc. Operates an eCommerce marketplace. $3,300 NA
09/06/16 Oracle Corp. LogFire, Inc. Provides cloud-based warehouse management applications for eCommerce companies. NA NA
09/05/16 Rakuten, Inc. Fablic, Inc. Develops an online flea market application. NA NA
09/05/16 Bregal Capital Onlineprinters Operates as a web-to-print service provider focused on B2B solutions. NA 10.5x
08/15/16 Agile Network LLC Ajillus, Inc. Designs and supplies software for shipping services. NA NA
08/10/16 Unilever Plc Dollar Shave Club, Inc. Delivers razors and other personal grooming products to consumers by mail. $1,000 6.6x
08/08/16 Google, Inc. Orbitera, Inc. Provides eCommerce, analytics, and cloud technologies for software vendors to assist in distribution. $100 NA
08/04/16 StubHub, Inc. Ticketbis SL Develops and operates an online ticket exchange platform. $165 6.4x
07/20/16 Expedia, Inc. Trover, Inc. Develops and markets online applications that collect and organize user generated travel information. NA NA
07/14/16 eBay, Inc. Ticket Utils, Inc. Provides a system to manage the distribution of tickets to multiple services. NA NA
07/12/16 Rakuten Marketing LLC Next Performance SAS Offers retargeting solutions for brands and retailers. NA NA
07/11/16 salesforce.com, inc. Demandware, Inc. Provides cloud-based digital commerce solutions for retailers and branded manufacturers. $2,670 10.5x
07/01/16 Stamps.com, Inc. ShippingEasy Group, Inc. Provides online shipping services. $63 NA
06/23/16 Providence Equity Partners LLC OEConnection LLC Offers eCommerce technology for OEM distribution networks. NA NA
06/20/16 JD.com, Inc. The Store Corp. Offers grocery, electronics, and apparel online. $2,918 NA
06/14/16 Bed Bath & Beyond, Inc. One Kings Lane, Inc. Engages in the online retail of home decor and furniture products. NA NA
$870 6.6x
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
NOTABLE MEDIA, CONTENT, AND GAMING M&A TRANSACTIONS
(Number of Transactions) (Enterprise Value / Revenue) Media, Content, and Gaming
volume grew over 44% in 3Q 2016 versus the prior quarter, with strategic deal volume alone growing over 50%.
After four very strong quarters, the median revenue multiple in Media, Content, and Gaming has returned closer to the aggregate historical median of 3.8x.
Verizon’s ongoing acquisition of Yahoo is part of a multi-billion dollar effort by Verizon to advance its mobile-first content strategy—highlighting a contest amongst several larger players (including AT&T) who endeavor to capture a valuable younger audience.
As major content providers and tech incumbents push into the realm of virtual reality, mobile and online gaming valuations still remain strong.
COMP SET MEDIANS CORRELATION WITH EV / REVENUE MULTIPLE
13
As of September 30, 2016.
9.9x
6.5x
5.5x
4.2x
3.9x
3.2x
2.7x
2.5x
2.5x
2.3x
2.2x
1.2x
1.2x
Social Media
Bellwethers
Search Portals
Travel
Community Info
Marketplace
Gaming
Digital Media
Data Networks
Local Online
Vertical eCommerce
Marketing Tech
Promotional
27% 37% 17% 64% 71% 5%
13% 37% 21% 46% - 78%
12% 17% 27% - 54% -
9% 5% 14% 70% - 15%
5% 8% 26% - - 88%
28% 14% 20% 12% 23% 76%
16% 12% 27% 79% - -
11% 21% 16% 76% 39% 86%
12% 22% 14% 46% 34% -
25% 34% 15% 67% - 43%
9% 31% 13% 77% 19% 82%
18% 22% 18% 51% 7% 89%
14% 88% 7% 51% - -
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
SUMMARY OF TECHNOLOGY IPOS
The IPO market showed signs of renewed life in 3Q 2016, with eight technology companies going public.
Notable IPOs included Line, which priced at $32 at the beginning of July; Talend, which priced at $18 per share at the end of July; and Nutanix, which priced at $16 per share at the end of September and has registered an impressive 131% growth in share price since listing.
The successful IPO of Nutanix as well as the sustained success of Twilio, which currently trades at over 300% of its offer price, may renew comfort around the IPO market, particularly as venture capital funding slows.
The resulting impact from the US Presidential election may shorten the promising IPO window that the last two quarters have created.
MARKET CAP AT IPO (LTM) REVENUE GROWTH (1YR PRIOR TO IPO)OFFERING SIZE AT IPO (LTM)
RECENT U.S. IPO ACTIVITY (BY OFFERING SIZE)
24%
29%
47%
< 25% 25 - 75% > 75%
6%
44%
17%
33%
$0-50M $50-500M $500M-$1B $1B+
8%
23%
38%
31%
$0 - 50M $50 - 100M $100 - 250M $250M +
(All tech IPOs over the last 12 months) (All tech IPOs over the last 12 months) (All tech IPOs over the last 12 months)
Digital Media & Online Content Tencent SINA Corporation IAC Pandora WebMD Health Sohu.com XO Group Blucora Ev eryday Health TechTarget
Digital Media & Online Content (cont'd) Demand Media Townsquare Media
Social Media Facebook Twitter Weibo Momo Match Group Spark
Gaming Nintendo Activ ision Blizzard NetEase Electronic Arts Ubisoft
Entertainment
Take-Two
Interactiv e Zynga GREE Glu Mobile
Proprietary Data Networks Alliance Data Acxiom comScore Neustar YouGov Plc
Community Based Information Serv ices CoStar Group Zillow Group Auto Trader Group Rightmov e Yelp Moneysupermarket 51job Autohome Bankrate Angie's List
Community Based Information Serv ices
(cont'd)DHI Group Monster Worldwide Care.com
Adv ertising Networks / Search Portals Alphabet Baidu, Inc. Yahoo! Nav er Yahoo! Japan Yandex N.V.
Marketing Technology Adobe Criteo SA HubSpot Bazaarv oice The Rubicon Project TubeMogul QuinStreet Rocket Fuel
Local Online Adv ertising GoDaddy Wix.com Endurance
InternationalWeb.com Tucows Marchex
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TECHNOLOGY, MEDIA & TELECOM
QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
Enterprise Market % of 52 1-Year Stock 3-Year Stock Revenue Growth LTM EBITDA Enterprise Value / Price /
Company Ticker Value Capitalization Week High Performance Performance LTM NTM Margin LTM Rev. 2016E Rev. LTM EBITDA Earnings
APPENDIX: INTERNET & DIGITAL MEDIA SECTOR PUBLIC COMPANY METRICS
MARKETING TECHNOLOGY
19
ADVERTISING NETWORKS / SEARCH PORTALS
Marketing
Technology
Advertising
Networks /
Search Portals
Local Online
Advertising
Internet
Bellwethers
LOCAL ONLINE ADVERTISING
INTERNET BELLWETHERS
Marketplace
Proprietary Data
Networks
Community
Based Info
Services
Travel
Flash Sales /
Promotional /
Coupons
Vertical
eCommerce
Digital Media &
Online Content
Social Media
Gaming
As of September 30, 2016.Enterprise value and market capitalization figures in millions USD.Market capitalization figures exclude non-traded shares
Harris Williams & Co. has a broad range of industry expertise, which create powerful opportunities. Our clients benefit form our deep-sector experience, integrated industry intelligence and collaboration across the firm, and our commitment to learning what makes them unique. For more information, visit our website.
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QUARTERLY INTERNET & DIGITAL MEDIA SECTOR REVIEW │ 3Q 2016
Harris Williams & Co. (www.harriswilliams.com and www.harriswilliams.de) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide.The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisitionadvisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.
Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK,registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze, and Mr.Aadil Khan, authorised and regulated by the Financial Conduct Authority.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt amMain, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. PermanentRepresentative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIALINSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANYFINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUTTHE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ABOVE ADDRESSES OR NUMBERS.
The information and views contained in this report were prepared by Harris Williams & Co. (“Harris Williams”). It is not a research report, as such term is defined by applicable lawand regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financialinstruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable, but Harris Williams makes norepresentation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to,have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment bankingservices for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities,options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and aresubject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisionsusing their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is notnecessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior writtenconsent.