The Jordan, Edmiston Group, Inc.

(JEGI)
offered a select group of private equity execu-
tives that invest in the media, information,
marketing services and technology sectors the
opportunity to provide their keen insights on
the current state of their funds investment
activities and their outlook on the market:
1. What key market forces will impact your
investment activities into 2013? How active
do you anticipate being in M&A over the next
12-18 months?
2. In which market sectors within media,
information, marketing services and technolo-
gy are you looking to invest and why?
3. What is your view of the debt market today
and over the next 6-9 months? How is it
affecting transactions and multiples? For your
transactions, what is your optimal mix of equi-
ty, senior and mezzanine debt?
Here are their responses:
Andy Davis, Managing Director
BV Investment Partners
[email protected]
www.bvlp.com
We anticipate M&A activity to be quite robust
over the next 12-18 months. This year, BV is
on track to have 6-8 realizations, mostly to
strategic acquirers. We continue to find high
growth, attractive companies in information
services and communications, as these areas
are growing much faster than the economy,
due to long-term secular growth trends.
Over the past decade, the firm has primarily
invested in high growth, mission critical,
information services companies. BV takes a
thesis-driven approach to investing in higher-
than-average growth segments of the economy,
within the information sector.
Despite dramatic improvement since 2008,
debt markets are still very discriminating; we
expect the debt markets to remain open to
credit worthy buyers. We focus on creating
value through growing earnings, so dont typi-
cally try to maximize the leverage on our deals.
We keep the balance sheets of our portfolio
companies relatively simple.
Walter Florence, Managing Director
Frontenac Company
[email protected]
www.frontenac.com
In the past two years, Frontenac has bought six
new platform companies and has sold seven
portfolio companies, and we see that momen-
tum continuing into 2012. As a firm, we are
still focused on investing behind strong man-
agement teams that see an opportunity to
build a market leading company; we call it
CEO1st investing. We have also been
uniquely focused on the family and founder-
owned business market, with over 220 such
transactions completed. If the economy con-
tinues to slowly strengthen, or even holds, deal
flow should continue to grow, with the help of
strong debt markets.
(continued on page 6)
PE Investors See Robust M&A Activity Ahead
July 2012 Independent Investment Banking for Media, Information, Marketing Services & Technology
In This Issue...
PE Investors See Robust M&A Activity
Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Active M&A Market Continues, Led by
Marketing & Interactive Services . . . . . . .1
Digital M&A at the Event Horizon . . . . . .4
SIIA Strategic & Financial Investment
Conference . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Exceptional Transaction Experience . . . .8
Mergers and acquisitions in the media, information, marketing services and tech-
nology sectors continued at a fast clip in the first half of 2012, as the number of
deals rose 52% over 2011 levels. Announced transaction value increased 49% to
nearly $32 billion, primarily due to a few multi-billion dollar transactions, with
the balance of market activity centered around mid-sized transactions.
Overall, acquirers have been focusing on smaller, complementary acquisitions,
with nearly 95% of transactions in 1H 2012 at values of less than $100 million.
Only five deals exceeded $1 billion in value, including Alibaba Groups pending
acquisition of 20% of its shares from Yahoo for $7.1 billion, and the $3.3 billion
buy-out of TransUnion by Advent International and Goldman Sachs.
(continued on page 2)
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Newsletter: http://tiny.cc/JEGI_Client_Briefing
JEGI hosted its first Emerging Company Dinner of
2012 on May 17th at the 21 Club in New York City.
Follow JEGI on Twitter:
http://twitter.com/JordanEdmiston
Active M&A Market Continues, Led by Marketing
& Interactive Services
$70
$60
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$40
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400
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First Half M&A Transactions and Value
value transactions
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$5.3
source: jegi transaction database
$31.7
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(From left) Lance Maerov, SVP, Corporate
Development, WPP; Wilma Jordan, CEO, JEGI;
Tolman Geffs, Co-President, JEGI; Matthew Egol,
Partner, Media & Entertainment, Booz & Co.; and
Randall Rothenberg, President & CEO, IAB
(From left) Brian Keil, VP, Strategy & Business
Development, Arbitron; Henrique De Castro,
President, Global Media, Mobile & Platforms,
Google; and Kurt Abrahamson, CEO, ShareThis
2 JEGI Client Briefing July 2012
The majority of the deal activity in the first half
of 2012 took place across the interactive, mar-
keting services and technology markets. B2B
and B2C Online Media & Technology,
Marketing & Interactive Services, and Mobile
Media & Technology accounted for 79% of
total deals and 75% of deal value for the period.
Marketing & Interactive Services
There are clashing forces in the marketplace.
On the one hand, there is the uncertainty cre-
ated by such factors as historically high unem-
ployment rates and low consumer confidence,
the Eurozone challenges in Greece, Spain and
elsewhere, as well as poorly performing bell-
wether stocks and post-IPO hangover (e.g.,
Zynga, Facebook, etc.). At the same time,
unprecedented waves of change and innovation
are creating new opportunities in the market.
The explosive growth of social media the
Socialization of Everything is transforming
whole industries, such as entertainment, news,
e-commerce, and gaming. Large brands are
quickly trying to adapt and are shifting dollars
to interactive media and below the line market-
ing (i.e., customer-centric communications,
typically with measurable results). As a result,
Internet advertising spending for Q1 2012 set
a new record at $8.4 billion, according to the
Interactive Advertising Bureau (IAB). More
online consumers than ever are taking to the
Internet to inform and navigate their daily lives
by desktop, tablet or smartphone, said
Randall Rothenberg, President and CEO, IAB.
Marketers and agencies are clearly and wise-
ly investing dollars to reach digitally connect-
ed consumers.
At the same time, mobile is exploding.
Smartphone sales have surpassed PC sales, and,
according to StatCounter, mobile traffic
accounted for 10% of Internet traffic in May
2012 vs. less than 1% in December 2009.
According to eMarketer, mobile ad spend will
reach $10.8 billion in 2016, up from $2.6 bil-
lion in 2012 and representing a CAGR of
43%. There is a secular evolution at hand,
and marketing dollars continue to rapidly
follow consumers. Media consumption
continues to shift to the Internet, and now
to mobile, moving away from traditional
media. On average, consumers are spend-
ing 26% of their media time online and
10% of their media time with mobile,
according to Kleiner Perkins partner Mary
Meekers annual overview of Internet
trends. Digital ad spending has started to
catch-up with time spent online, with
22% of ad dollars flowing to the web.
However, the gap is still significant with
mobile, as it captures only 1% of ad dol-
lars. According to Meeker, closing the gap
between share of time spent online/on
mobile and share of advertising dollars
spent online/on mobile represents a $20
billion annual advertising opportunity in
the US and points to the continuing move-
ment of ad dollars to digital media in the years
ahead.
As a result, companies are investing in market-
ing services to better assist their customers and
capture more revenue. Advertising agencies
and marketing services companies are retooling
their business models by investing in integrat-
ed and interactive marketing solutions, such as
Experians acquisition of Conversen, a pioneer
in developing interaction management tech-
nologies, enabling cross-channel conversations
(JEGI represented Conversen in this deal).
According to Doug Bacon, Director, Corporate
Development, Experian, We see Conversen as
a bridge between our digital and traditional
offerings. The concept of consistent messaging
to the consumer, regardless of channel, is criti-
cal to marketing success. This acquisition
becomes the glue that puts it all together and
provides us with a platform to tie together our
market leading products into a single point of
entry for our clients.
Large technology companies, such as IBM,
Oracle, Adobe and others, are also aggressively
investing in marketing technology solutions to
help marketers create value from their data and
provide customers with key business intelli-
gence and analytics, to drive better customer
experiences and enhance customer engage-
ment. Oracles $300 million acquisition of
Vitrue, which enables companies to manage
their presence on social networks, clearly high-
lights this point. These trends have made
Marketing & Interactive Services by far the
most active sector for M&A, accounting for
40% of all transactions and 27% of total value
in 1H 2012.
Areas of Focus for Marketing & Interactive
Services M&A In the first half of 2012, the ad
agency and digital agency sub-sectors were the
most active within Marketing & Interactive
Services, accounting for a combined 34% of
deal volume and 26% of deal value. Marketing
technology and market research/consulting
were the next most active sub-sectors, each
accounting for 16% and 15%, respectively, of
deal volume for the half year. Other active sub-
sectors for M&A included data & analytics (17
deals), PR agency (12 deals), ad technology (13
deals), and monitoring & intelligence (11 deals).
Drivers of M&A Value The Marketing &
Interactive Services sector saw only one $1+
billion transaction in the first half of 2012
Microsofts acquisition of Yammer, a provider
of social networking portals for enterprises, for
$1.2 billion. However, there were two $500+
million deals and seven more with values of
$200 million and higher. The marketing tech-
nology sub-sector accounted for 37% of
Marketing & Interactive Services deal value,
led by Salesforce.coms acquisition of Buddy
Media, which helps companies manage across
social media platforms, for $745 million. Other
Active M&A Market Continues, Led by Marketing & Interactive Services (cont. from p. 1)
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marketing and communications
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JEGI Client Briefing July 2012

Business-to-Business Media 8 23
2012 2011
Value ($MM)
% Change
B2B Online Media & Technology
Exhibitions & Conferences
Consumer Magazines
Database & Information Services
B2C Online Media & Technology
Education Information, Technology & Training
39
11
16
21
130
32
3,056
165
2,020
3,064
4,554
1,272
75% 266%
21%
164%
69%
71%
2%
(3%)
160%
165%
(94%)
103%
(7%)
(9%)
14 82
47
29
27
36
133
31
7,932
437
122
6,205
1,153
Media, Information, Marketing Services & Technology M&A Activity
No. of Deals Value ($MM) No. of Deals Value
January -June January - June
Industry Sector
Total 430 $21,236 52% 49% 652 $31,658
Marketing & Interactive Services 129 5,740 103% 51% 262 8,677
No. of Deals
Mobile Media & Technology 44 1,345 66% 109% 73 2,808
4,242
marketing technology deals making the top 10
in 1H 2012 included the Intuit acquisition of
Demandforce, a SaaS application that auto-
mates Internet marketing and communica-
tions, for $424 million and Oracles acquisition
of Vitrue for $300 million.
Ad and digital agencies combined accounted
for $2.2 billion of deal value in 1H 2012, led
by WPPs acquisition of digital agency AKQA
from General Atlantic for $540 million.
Market research and consulting was next,
accounting for 12% of deal value, including
the acquisition by Genstar Capital of eResearch
Technology, a provider of health outcomes
research services, for $377 million. The chart
below shows the top 10 Marketing &
Interactive Services deals by value in the first
half of 2012.
The New Normal At the SIIA Strategic &
Financial Investment Conference on June 21 in
NYC, JEGI Co-Presidents, Tolman Geffs and
Scott Peters, provided the opening keynote
presentation for more than 200 M&A focused
strategic executives and private equity
investors. This insightful session described the
confluence of global uncertainty with the
forces of rapid technological change as the
New Normal, leading to interesting business
combinations via M&A activity. Examples
include several deals highlighted above, includ-
ing Experian/Conversen, Oracle/Vitrue and
Salesforce.com/Buddy Media, as well as the
Amazon acquisition of Kiva Systems, which
makes robots used in shipping centers to simpli-
fy operations and reduce costs, and the acquisi-
tion by Facebook of Instagram, which provides
Facebook users with a compelling experience
for photo sharing, for $1 billion. Companies,
possibly more than ever, are focusing on servic-
ing their customers, and we expect to see more
interesting combinations via M&A in the years
to come. The complete presentation is available
at: http://tiny.cc/SIIA_Presentation.
M&A Highlights for 1H 2011
The b2b online media and technology sec-
tor saw a 21% rise in the number of M&A
transactions announced in 1H 2012 vs. 1H
2011 and a 160% increase in deal value to
$7.9 billion, led by the pending Alibaba
Group/Yahoo deal. Other notable Q2 transac-
tions included the IHS acquisition of
Globalspec, a b2b lead gen provider connect-
ing industrial marketers with their target audi-
ences in engineering, technical and industrial
markets; the acquisition by LinkedIn of
SlideShare, a professional content sharing plat-
form, for $119 million; and Norwest Venture
Partners acquisition of a 49% stake in Manta,
a web site for business listings serving the local
market, for $44 million.
The b2c online media and technology sec-
tor was the second most active in the first half
of 2012, with 133 transactions at a total value
of $4.2 billion very similar results to the first
half of 2011. The largest deal of the half was
the acquisition by Cerberus Capital
Management of 53% of AT&Ts Advertising
Solutions business, which comprises a combi-
nation of print and online yellow page listings,
for $950 million in April. Other notable Q2
deals included Axel Springers acquisition of
Totaljobs, an online recruiting platform, from
Reed Elsevier for $176 million; Ybrant
Digitals acquisition of online shopping com-
parison sites PriceGrabber, Classes USA and
LowerMyBills from Experian for $175 mil-
lion; and the acquisition by Cox Target Media
of Savings.com, an online source for savings,
personalized deals and money-savings experts,
for $100 million.
M&A activity for the business-to-business
media sector continues to be relatively quiet,
with only 14 deals in the first half of 2012, for
a total value of $82 million. In Q2, Questex
Media sold its b2b industrial and specialty
publications to North Coast Media; and Bobit
Business Media acquired b2b media assets for
the trucking industry from Newport Business
Media.
The consumer magazine sector has been
uneventful in the first half of 2012, with 27
deals at a total value of $122 million, a sharp
contrast to the first half of 2011, which saw
several multi-hundred million dollar deals,
including the acquisition by Hearst
Corporation of Lagardres magazine portfolio
for $651 million.
The database and information services
sector picked up considerably in the first half
of 2012, led by the PE buy-out of TransUnion
in Q1; and two transactions in Q2 Veritas
Capitals acquisition of Thomson Reuters
Healthcare business, a provider of healthcare
data and analytics, for $1.25 billion; and
Piramal Healthcares acquisition of Decision
Resources, a provider of healthcare data,
research and consulting, from Providence
Equity Partners for $635 million. Other
notable Q2 deals included the R.R. Donnelley
acquisition of Edgar Online, a distributor of
financial data and public filings, for $67 mil-
lion; and Markits acquisition of Data
Explorers, a provider of global securities lend-
ing data.
The education information, technology
and training sector saw a similar number of
deals and value in the first half of 2012, com-
pared to the first half of 2011. The most
notable deal of Q2 was the acquisition by
PLATO Learning of Archipelago Learning, a
SaaS provider of supplemental education
products, for $301 million. Pearson contin-
ued to be very acquisitive in the education sec-
tor, with two acquisitions in May
GlobalEnglish, which offers on-demand enter-
prise solutions for advancing Enterprise
(continued on page 5)
4 JEGI Client Briefing July 2012
Digital M&A at the Event Horizon
By David Clark, Managing Director, JEGI, [email protected]
Against the backdrop of a challenged global economy, growth in digital
media spending continues uninterrupted. The rate of growth is impres-
sive 2006-2011 CAGR of 13% and expected CAGR of 15% for 2011-2016.
No other sector of the economy has grown, or is expected to grow at this
rate, which is 5X the growth rate of US GDP.
The forces at work in the sector are powerful and continue to com-
pound. Smart phone penetration of 50+% at home and in the work-
place. Approximately 15% YoY growth in ecommerce. Rapid proliferation
of tablet, app and emedia platforms. And accelerating growth in brand
marketer spending in online video and social media.
These mutually reinforcing market drivers call to mind the concept of
event horizon. In physics, an event horizon is the point at which an
object becomes so large black holes are the best example that no
nearby matter can escape its gravitational field. The size of the digital
sector (media + services + infrastructure) has reached this level of scale.
And the impact is so far-reaching that companies well outside of the
core ad tech sector are feeling the pull.
To be sure, search marketing and online display advertising, the true
work horses of ad tech, have already sailed past the event horizon. Every
conceivable publishing, lead gen, response marketing and ecommerce
model has been permanently re-shaped by search and online display.
M&A transactions have played a significant role in re-shaping the ad
tech landscape. In the past five years alone, JEGI has tracked approxi-
mately $83 billion of online media and interactive marketing transac-
tions. And ad tech M&A is not yet done. With well over $1 billion of ven-
ture capital invested in the extremely crowded ad network, DSP and
real-time bidding category (and with the IPO market likely shut for a
while to come), consolidation needs to occur. True differentiation in the
DSP category is low, marketing noise is high, and the large media
agencies have created their own competing trading desks. As a result,
some of the largest, best funded independent companies in the ad tech
sector will likely pursue M&A as an alternative, if not preferred exit. It
will be interesting to see how sizable investments in the DSP/RTB cate-
gory get realized.
Equally interesting to observe are the new industry participants from
outside the ad tech sector that are getting pulled closer to the digital
event horizon. In terms of M&A activity, what were seeing is ad tech
M&A giving way to marketing technology M&A. There is a notable
cooling down of M&A in the ad tech categories of search and display
services and tools, while M&A activity has heated up in marketing infra-
structure, particularly for technology solutions that address the needs
of global brand marketers and premium publishers (including ecom-
merce brands that operate as marketer and publisher alike). In a recent
Forbes article, Randall Rothenberg stated that Marketing for large com-
panies is fundamentally an industrial process. They depend on scale.
No surprise, then, to see companies like IBM looking over the horizon
and seeing the large opportunity in enterprise marketing systems, and
then rapidly assembling an enterprise marketing technology stack via
very aggressive M&A. From 2010 to 2012 alone, IBM invested over $3 bil-
lion directly pointed at enterprise marketing management.
Heres why. According to a new survey by the CMO Council, 80% of 200
global marketing executives confirmed that digital marketing is a
strategic agenda item with strong corporate support. Meanwhile, over
a third of these executives admitted that their digital models were little
more than a collection of poorly integrated, tactical point solutions.
Along those lines, IBMs State of Marketing 2012 report revealed that
more than seven out of 10 respondents to its survey said that they
believe integration is important across owned, earned and paid chan-
nels, while less than three out of 10 were effectively integrating those
different channels.
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SIIA Strategic & Financial Investment Conference
The 2012 SIIA Strategic & Financial Investment Conference was a big
success. More than 20 presenting companies from across digital media,
data/information, SaaS/software and marketing technology shared
their stories with nearly 250 strategic M&A-focused executives and
financial sponsors. This sold out event, which was co-founded by spon-
sors JEGI and Veronis Suhler Stevenson, was held at the Princeton Club
in NYC on June 21.
The audience comprised executives from a strong mix of global compa-
nies and private equity firms, including Aegis Media, American Express,
Arvato, Bloomberg, BV Investment Partners, Catalyst Investors, Cengage
Learning, Cognizant, DMG Information, Dow Jones, Dun & Bradstreet,
Equifax, Frontenac, Gartner, GE Capital, Interpublic Group of Companies,
Leeds Equity, LexisNexis, McGraw-Hill, MidOcean Partners, News Corp,
Nielsen, Oaktree Capital, Riverside Company, Spire Capital, Summit
Partners, Thomson Reuters, Wicks Group, Wolters Kluwer, WPP, and
many others.
JEGI Co-Presidents Tolman Geffs and Scott Peters keynote presentation
titled The End of The World As We Know It: Innovation & Growth in
Digital Services provided an insightful view on the New Normal.
While there is much uncertainty in the world, there are also exciting
waves of innovation, leading to interesting combinations via M&A. The
complete presentation is available at: http://tiny.cc/SIIA_Presentation.
Speaking of M&A, while presenting companies varied in terms of size
and lifecycle stage, they are each actively seeking a 'next stage' oppor-
tunity, which could include an add-on acquisition, a strategic partner-
ship, a round of investment, or an exit. See the chart below for the com-
plete set of presenting companies and be sure to hold June 13, 2013 on
your calendar for next years conference. I
2012 Presenting Companies
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5 JEGI Client Briefing July 2012

IBM and its peers Oracle, SAP, Teradata, and others are gearing up to help out with that
problem. In essence, the Enterprise Resource Planning (ERP) players have acquired business-
es that will help marketers integrate the rich yet disparate data coming from ad tech digi-
tal ad campaigns, online consumer interactions (including social media) and ecommerce
transactions and manage that data within highly evolved Content Management, CRM and
Business Intelligence systems. The size of this market will likely rival online ad spending, and
it offers a more attractive long-term, recurring revenue model SaaS subscriptions, software
licenses and managed services to the global Fortune 1000.
So, Enterprise Marketing Technology has become a whole new center of gravity in the digital
media and marketing domain. And again, we can see an expanded circle of software and serv-
ice providers getting pulled into the market. You know the definition of marketing (and for
that matter, CPA) has changed when you see Deloitte, the audit and consulting firm, launch
Deloitte Digital (as Deloitte described it, to provide our clients with a suite of strategy, cre-
ative, user experience,
engineering and
implementation serv-
ices across mobile,
web, social and digital
content solutions; or
where left brain
meets right brain) to
house its recently
acquired UX/UI busi-
ness, Ubermind, the
developers of iTunes.
You know the defini-
tion of campaign man-
agement has changed when Infosys, a leading Indian BPO firm, has partnered with WPP to
form BrandEdge, a SaaS digital marketing platform for global brands. And, you know the def-
inition of both CRM and social media are changing when you see Oracle and Salesforce.com
acquiring (for $300 million and $745 million, respectively) Vitrue and Buddy Media, two lead-
ing though not yet providers of social media content publishing solutions.
As BusinessInsider reported on these deals, While both [Oracle and Salesforce.com] are huge
in their fields, they're known for handling the non-glamorous, nitty-gritty back-end of the
marketing mix. It is a gritty, but sizable market and the current hot spot for sector M&A.
Welcome to the next horizon. I
JEGI's Marketing Technology M&A Heat Map
Digital Marketing Technology
User Interface (UI)/ User Experience (UX)
Web Content Management Enterprise Marketing Mgmt Business Intelligence
Online Ad Technology
Customer Experience Management
Payment and Fulfillment
Analytics
Customer Relationship Management
Customer Support/Media KPO
Acquisition Lead Gen eCommerce
Marketing Dbase Ad Networks Real-Time Bidding (RTB)
Campaign Management Optimization Audience Targeting
Offers Ad Units Applications
Ad Serving
Performance
Ad Ops Ad Sales
Search Email Display Video Mobile Social
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Fluency, for $90 million; and Certiport,
provider of performance-based certification
exams and practice test solutions. Other
notable deals in Q2 included the John Wiley
acquisition of textbook publisher Harlan
Davidson; and the acquisition by Boathouse
Capital and Renovus Capital Partners of
Atomic Learning, which provides educators
with professional development and training
resources for introducing technology in the
classroom.
The exhibitions and conferences sector
saw a sharp increase in number of deals and
value in the first half of 2012, compared to
the first half of 2011. The 29 transactions
announced at a total deal value of $437 mil-
lion represented 164% and 165% respective
increases over 1H 2011 levels. Two event
services deals led the parade, with Maritz
acquiring Experient, a provider of meeting
and event services, from Riverside Partners
and Veronis Suhler Stevenson in April (JEGI
represented Experient in this deal); and Gen
Cap America acquiring Nth Degree, a
provider of event management and marketing
services, from Frontenac Company in March.
In Q2, global event companies continued
making acquisitions of exhibitions in emerg-
ing markets, such as the Tarsus acquisition of
Life Media, an organizer of Istanbul-based
trade fairs and ITEs acquisition of
BeautexCo, an organizer of beauty events in
the Ukraine.
Mobile media and technology was the
third most active sector for M&A in 1H
2012, with 73 announced transactions at a
total value of $2.8 billion, representing 66%
and 109% increases, respectively, over 1H
2011. Several notable mobile-related transac-
tions took place in Q2, including the
Facebook acquisition of Instagram. Facebook
completed five additional mobile deals in the
quarter, with the acquisitions of Face.com,
mobile facial recognition software and tech-
nology, for $60 million; Karma Science, a
mobile gift-giving application, for $80 mil-
lion; as well as Tagtile, Lightbox and Glancee.
Other deals in the quarter included Gree
Internationals acquisition of Funzio, a
mobile game developer, for $210 million; the
Intuit acquisition of AisleBuyer, a mobile
payment service that allows customers to pur-
chase an item for home delivery by scanning
a bar code from inside the store, for $90 mil-
lion; and Conde Nasts acquisition of ZipList,
which enables users to find recipes online and
assemble shopping lists to sync to iPhone and
Android phones, for $14 million. I
Active M&A Market
Continues (cont. from p. 3)
To help our clients harness the promise of digital tech-
nologies, we launched Deloitte Digital to provide our
clients with a suite of strategy, creative, user experience,
engineering and implementation services across mobile,
web, social and digital content solutions.
- Janet Foutty, National Managing Director,
Deloitte Consulting LLPs US Technology Practice
6 JEGI Client Briefing July 2012
We have long focused on business services as
an attractive area for investment. Meeting the
competitive needs of enterprise customers
today requires best-in-class, cost-effective solu-
tions, often delivered by businesses specializing
in a specific functional process or vertical mar-
ket, or both. This is especially true in the
information, marketing services and technolo-
gy sectors.
The debt markets are strong, but not across all
sectors. There is a clear thirst for yield in
todays low interest rate environment. In my
view, the rally in the credit markets stems from
the search for higher yields, helped by a stabi-
lizing and strengthening economy. Strong
debt markets drive the M&A markets and
multiples. Size of deals is another real consid-
eration for multiples and optimal capital struc-
tures. Bigger companies appeal to more
lenders. At the lower end of the market, 2.5x
to 3x is still the prevailing leverage range. At
the higher end, there are deals above 6x. It all
depends on the strength of the credit.
Stewart Kohl, Co-CEO
Riverside Company
[email protected]
www.riversidecompany.com
Were seeing a lot of activity in our deal pipeline,
thanks to our global Origination team. A num-
ber of factors are driving the uptick in activity,
and multiples remain high for top-quality com-
panies after the difficult period of 2009 and
2010. Meanwhile, strategic and financial buyers
are eager to put money to work in a low interest
rate environment and in advance of a cyclical
recovery. Some private equity buyers are trying
to use funds before the expiration of their invest-
ment periods. Many buyers sat on capital for
the past few years, and there is a need to invest
in quality businesses. Some sellers are motivat-
ed to sell before potential tax law changes. And
finally, despite macroeconomic uncertainty,
some lenders also have strong incentives to lend
money, and theyre hungry to get deals done.
Jeff Stevenson, Managing Partner
Veronis Suhler Stevenson
[email protected]
www.vss.com
The increased availability of credit and the
expiring investment periods of many private
equity funds have been key drivers of the recent
increase in middle market M&A activity and
valuation multiples. A continued weakening of
the European banking system and threats of
exit or insolvency from a variety of Euro coun-
tries are the events most likely to impact US
middle market investing.
VSS is primarily focused on Business and
Information Services, SaaS and Education
companies with a portion of recurring revenue
for new platform investments. We are actively
looking for add-ons for a majority of our plat-
form companies.
The current debt market in the US is more
active with senior debt multiples as high as
5.5x-6x for businesses with more than $35 mil-
lion of EBITDA and 4x-4.5x for less than $25
million of EBITDA. We do not expect the
Euro crisis to significantly impact the US bank-
ing sector and believe leverage multiples will
remain at current levels. Clearly, the more
aggressive approach by lenders has forced trans-
action multiples higher and incentivized com-
panies to seek a sale. We aim to keep a conser-
vative capital structure with approximately 2x-
4x senior leverage, 1x-2x mezzanine and 40-
50% equity.
Dan Kortick, Managing Partner
Wicks Group
[email protected]
www.wicksgroup.com
The economy continues under generally
improving conditions. Different sectors and
specific niches within those sectors are reacting
to this recovery in varying degrees. Many fast
growing segments have already achieved and/or
exceeded pre-recession benchmarks. Wicks
intends to remain an active investor in niche
segments where recovery growth rates exceed
that of GDP.
Tax strategies and planning are also a market
force that will drive M&A for the remainder of
2012. With the prospect of changes to capital
gains and gift tax exemptions, entrepreneur-
and family-owned businesses are prudently
planning and may take advantage of a liquidity
event this year.
The debt markets appear to be open, but not
aggressively so, for platform companies in our
size range ($5-$15 million EBITDA). We are
encouraged by seeing more traditional banks re-
entering this part of the lower middle market,
and they are focused on quality transactions. In
the lower middle market, senior debt levels are
not typically greater than 50% of the capital
structure, and senior leverage multiples are in
the 3.5x-4.5x range.
Peggy Koenig, Managing Partner & Co-CEO
John Hunt, Partner/Head of Sr. Equity Funds
ABRY Partners
[email protected], [email protected]
www.abry.com
We closely monitor macroeconomic issues that
could disrupt the US M&A market. Any one
of several factors could impact investment
activity and the M&A market over the next 12-
18 months.
We continue to be active in buying and selling
companies. On the private equity side, we have
a number of sale processes underway, while
pursuing both new platform companies and
follow on acquisitions for existing platforms.
On the senior equity side, we continue to enjoy
tailwinds in committing new capital to smaller
growth-oriented companies in the middle mar-
ket. We expect this environment to continue,
as the lending environment for such firms has
not recovered in the way that the larger middle
market has.
We remain very active investors in sub-sectors
benefiting from broadband proliferation. We
are buying and selling data center companies, as
well as telecom related businesses that are real-
izing the benefits of these trends. We also are
actively investing in information businesses and
a myriad of business processing outsourcing
companies.
The debt markets are volatile and have been for
quite a while. We opportunistically tap the
debt markets for existing portfolio companies.
Debt capital is available to us from the lenders
with whom we have done business for many
years. Interest rates are still low, and we can
attract financing on relatively positive terms.
The sub-sector we are investing in will dictate
the mix of equity, senior and mezzanine debt.
Sean White, Partner
Spire Capital
[email protected]
www.spirecapital.com
There is a significant amount of equity capital
seeking good investments. This has created a
robust seller slanted environment. Potential tax
changes will be impactful as well. We have
recently sold two businesses and will probably
sell more. I would also anticipate several new
investments over this time period as well.
PE Investors See Robust M&A Activity Ahead (cont. from p. 1)
...we continue to enjoy tailwinds
in committing new capital to
smaller growth-oriented compa-
nies in the middle market.
The increased availability of
credit and the expiring invest-
ment periods of many private
equity funds have been key
drivers of the recent increase in
middle market M&A activity.
...strategic and financial buyers
are eager to put money to work
in a low interest rate environ-
ment and in advance of a cyclical
recovery.
Our focus is on the information and technology
sectors, because we see a better relationship
between valuations and growth in these market
segments. Said differently, valuations are more
compelling in these sectors for us. We are con-
sidering both.
The debt markets are currently favorable from a
pricing and availability perspective. Valuation
multiples are a bit higher due to the current
availability of debt financing. We prefer 60/40
debt to equity.
Sam Levine, Managing Director
Eos Partners
[email protected]
www.eospartners.com
We view the economy with caution and are
being conservative regarding capital structure.
We will be aggressive, but avoid overleveraging
the balance sheets of companies. During this
past recession, we bought the debt of six com-
panies overleveraged during good times. We
turned debt into equity by purchasing senior
debt at huge discounts and driving a restruc-
turing process. Today, those companies are
achieving strong growth.
Given the current uncertainty, we are making
private equity investments with modest lever-
age and some type of preferred equity that is
higher up in the cap structure. Over the past
13 months, we have made seven new platform
investments, many with entrepreneurs who
are not ready to seek a full exit but still want
an equity partner to either provide partial liq-
uidity and/or some growth capital. In cases
where our target has limited organic growth
prospects, we can make accretive acquisitions
of smaller tuck-ins. Both organic growth and
acquisition scenarios can generate attractive
private equity returns without using full mar-
ket leverage.
We continue to see some interesting opportu-
nities with companies transitioning from print
to digital and also in niche data driven trade
show/conference driven business models.
Having great data is a key foundation to driv-
ing growth.
Within the B2B media space, we are looking
at companies that have depth within one (or a
limited number) of verticals. Companies need
to focus on deep vs. wide so they can capture
the mindshare of their customers. We are also
looking at a number of events/trade show
businesses with high market share. Trade
shows arent going away.
As for marketing/media services, digital media
growth has slowed but is still growing at a high-
er rate than other channels. There is increased
commoditization and competition within the
digital realm, and many digital agencies have
had a hard time scaling, given the labor intensi-
ty relative to traditional mass media.
We generally dont put max leverage on the
balance sheets of companies we invest in and
usually avoid mezzanine debt. Instead, we
focus on companies led by entrepreneurs who
dont want to fully lever their companies, fear-
ing that max leverage will prevent them from
pursuing an aggressive growth strategy.
Mark Colodny, Managing Director
Warburg Pincus
[email protected]
www.warburgpincus.com
We expect deal activity to continue to be
strong for a variety of reasons:
For corporations:
Corporations can be very conservative
buyers when the economy is poor and they
are going through cost cutting exercises;
but when profits are stronger, as they are
now, corporations tend to get more confi-
dent as buyers.
They also have a lot of cash on their bal-
ance sheets.
In media, many traditional media compa-
nies are still furiously working on the
migration to digital and need acquisitions
to help them cross the Rubicon. That trend
will continue for many years.
For private equity:
Many private equity firms are contem-
plating fundraising and need to achieve
exits to do that.
The debt markets are very strong right
now, after a tough second half of 2011. We
are routinely seeing debt multiples in the
4x-7+x range, depending on the size and
predictability of the company. Meaningful
debt is starting to be available for Internet-
only companies.
The past six months have been very busy for
us as both buyers and sellers, and we expect to
continue to be active in the near future as well.
We are still highly intent on growth and
focused on digital media, electronic informa-
tion, software and tech-enabled services.
Although the valuations for digital media and
SaaS software in particular have been stratos-
pheric, we have continued to find interesting
minority investments in private companies.
Neil Garfinkel, Partner
Francisco Partners
[email protected]
www.franciscopartners.com
The acceleration of media dollars into online
(including social) and mobile channels will
continue through the foreseeable future.
While macro events (Europe and its dampen-
ing effect on US) will impact growth, the
underlying trends are very positive. We antic-
ipate being very active in M&A over the next
18 months.
We constantly review the digital marketing
landscape. We are particularly interested in
new investment platforms in (i) data-driven
digital marketing companies; and (ii) cross
channel analytics companies.
The current debt market is quite robust (3x-7x
EBITDA, depending on the quality of the
asset) which is helping deals get done.
However, we are more focused on growth than
on leverage, and most of our digital marketing
deals have very little leverage in the capital
structure.
Chris Langone, VP, Business Development
Symphony Technology Group
[email protected]
www.symphonytg.com
Market activity will be shaped by both politi-
cal and economic trends, such as Europe, the
Presidential election, the potential fiscal cliff, a
potential double dip and changes to the tax
code. I believe our deal-making ability will be
hindered by a lessening of debt availability,
offset by increasing middle market deal flow
from owner-operated companies looking to
sell before potential 2013 tax code changes.
We are equally active, if not more so, in down
markets.
For the middle market, I believe the debt mar-
kets will see more robust activity for the rest of
the year, at the normally lower leverage multi-
ples. We are seeing debt to equity ratios of
60/40 to 50/50 in the deals we are looking at
and total leverage of 4x to 5x, with great vari-
ability in leverage, depending on the profile of
the business. I
JEGI Client Briefing July 2012
7
The current debt market is quite
robust (3x-7x EBITDA, depending
on the quality of the asset) which
is helping deals get done.
There is a significant amount of
equity capital seeking good
investments.
...many traditional media com-
panies are still furiously working
on the migration to digital and
need acquisitions to help them...
Exceptional Transaction Experience
JEGIs client is mentioned first in each of the above transactions.

has sold the assets of
FUTURE MUSIC US
including
to
a portfolio company of
has acquired
a global digital marketing
services company

the No. 1 media brand
in the motorcycle industry
to
has sold

a leading provider
of banking information and analytics
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a leading European display ad
exchange for premium unsold inventory
has been sold
to
a unit of

a leading distributor of company
data and public filings for equities,
mutual funds and a variety
of other publicly traded assets
has secured $12 million
in growth capital
from

a leading provider of
integrated event solutions
and
a portfolio company of
The Riverside Company
and
VS&A Comm Partners Fund II
has been sold
to

a leading provider of social
media insights via search,
monitoring and measurement
has been sold
to

a leading developer of online
shopping solutions for local media
has been sold
to
a consortium of eight leading media
and publishing companies:
Advance Digital, A.H. Belo
Corporation, Cox Media Group,
Gannett Co. Inc., Hearst
Corporation, MediaNews Group,
The McClatchy Co., and
The Washington Post
150 East 52nd Street, 18th Floor
New York, NY 10022 (212) 754-0710
www.jegi.com
Bill Hitzig
COO
[email protected]
Scott Peters
Co-President
[email protected]
Richard Mead
Managing Director
[email protected]
Wilma Jordan
Founder & CEO
[email protected]
Tom Pecht
Managing Director
[email protected]
Tom Creaser
EVP
[email protected]
Adam Gross
CMO
[email protected]
Tolman Geffs
Co-President
[email protected]
Contact Us to Discuss
the Marketplace and Your Companys
M&A Strategy.
David Clark
Managing Director
[email protected]
Amir Akhavan
Director
[email protected]

a leading Australia-based
online community for parents
has been sold
to

a leading global social media agency
F R O M C O N T E N T T O C O MME R C E
has been sold
to
a unit of

the leading provider of consumer
shopping predictive targeting data
a divison of
has been sold
to

a SaaS marketing platform (CRM)
for real-time, multi-stage, and
multi-channel marketing including
social media, email, and mobile
has been sold
to

a leading B2B lead generation
provider for IT vendors

has been sold
to

a portfolio company of

a leading provider
of ecommerce solutions
to publishers via
has been sold
to
Journalism Online

has sold
Summers Press and select CCH
OSHA compliance and
employment guide publications
to
MEDIA
MARKETING
SERVICES
INFORMATION
TECHNOLOGY

has sold
to
a division of DMGT plc
a leading producer of trade shows
serving the U.S retail markets
for gifts, home furnishings,
action sports and antiques

for $180,000,000

a leading interactive marketing agency
and CRM solutions provider
a divison of
has been sold
to

has been sold
to
a provider of content, data,
advertising, and career services
for the oil and gas industry
for $39,000,000


the leading SaaS platform for retail
transaction optimization solutions

has been sold
to