Report: Quarterly analysis of UK-headquartered private equity control deals in the £10 million to £100 million segment

October 5, 2011 — Fusion DigiNet

  The volume and value of deals completed during the first nine months of 2011 in the lower mid- market investment space has increased year on year for the past three years, according to research from Lyceum Capital and Cass Business School.

For more information, visit the Lyceum Dashboard

Data from The UK Growth Buyout Dashboard – a quarterly analysis of UK-headquartered private equity control deals in the £10 million to £100 million segment – shows that 63 transactions completed between 1 January 2011 and 30 September 2011. This compares to 50 investments for the same period of 2010 and just 25 during the first nine months of 2009.

During Q3 2011, deal volume has built on an encouraging first six months of 2011 with a greater number of deals completed than in Q2. The combined value of those deals fell slightly (from £794 million to £785 million) but both volume and value of deals was still higher than the same quarter of 2010.

Q3 deal value being lower than Q2 despite five more transactions, indicates that there are fewer large deal opportunities however the lower mid-market continues to replenish itself as new businesses enter the space looking to grow with private equity investment.

Transaction sizes

The combined deal value of £785 million exceeds the £698 million recorded during Q3 2010 and the £220 million of Q3 2009.

The highest transaction value recorded in the last three months was £87.8 million, compared to a high of £100 million in Q2 H1 2010.

Meanwhile, transactions valued between £50 million and £100 million fell from seven in Q2 to five in Q3. The majority of the 22 lower mid-market deals completed were in the £26 million – £50 million range, with 86 per cent under £50 million.

The increase in deal activity indicates that there is a growing appetite for investment and that transactions should continue to rise unless there is a significant reversal in the state of the wider economy. There may not currently be the appetite for the larger end deals in the mid-market space but as long as volume maintains its upward trend, the necessary deal flow which keeps the market moving does exist.

Transaction types

Management buyouts (MBOs) and secondary buyouts (SBOs) remained the most prevalent transaction types for private equity investors, but the number of MBOs completed in Q3 2011 actually fell to nine from 12 in Q3 2010 – lower than each of the previous six quarters back to Q1 2010.

There were also two public to private delistings during Q3, compared to one in each of the previous two quarters.

No Initial Public Offerings (IPOs) were recorded, a trend which stretches back to Q1 of 2010 and is unsurprising in a financial climate of weak capital markets where so many anticipated floats have been shelved.

Trade, IPO and secondary exits

A total of nine secondary buy-outs (SBOs) characterised the quarter – the highest number of any quarter during the last two years and an indication that private equity firms are now beginning to sell assets that they have held onto throughout the depths of the economic downturn.

There were six exits to trade, higher than the previous two quarters but lower than the eight which took place in Q3 2010.

Investments by industry

Technology, media, telecommunications (TMT) businesses continue to dominate the lower mid- market with eight out of 22 deals this quarter (38 per cent) and five transactions in business support services.

Retail – undoubtedly one of the sectors hardest hit by a dip in consumer spending – continues an encouraging run of three deals or more completing in every quarter since Q2 2010.

Commentary

Andrew Aylwin, Partner at Lyceum Capital, said: “In the £10m to £100m value range, UK private equity deal volumes continue to recover. With 63 completed transactions so far for the 9 months to 30th September, the market is trending back to historical norms of 100+ control deals a year. The UK lower mid-market segment remains a plentiful source of high quality opportunities across a range of sectors and private equity firms such as Lyceum Capital continue to play a key role in supporting dynamic companies that need capital to continue their successful development and drive the recovery of UK plc.”

Professor Scott Moeller at Cass Business School commented further: “This performance of the UK lower- mid market in the third quarter is in distinct contrast to the overall market when much larger deals of £100 million plus are considered. That market has declined during the past two quarters and some reports show it declining dramatically in Q3 – Bloomberg, for example, this week reported a 43 per cent decline in deals with European purchasers for the overall market. Therefore, the volume of deals in the lower mid market is encouraging in this difficult economic environment, and may prove in the next quarter to continue to be resilient. There is further evidence in our figures of a positive shift in the market with a strong mix of industries, including healthcare, which was absent last quarter and a resurgence in technology deals.”

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Postmedia Network acquires Sprouter

October 4, 2011 — Fusion DigiNet

Canadian newspaper publisher Postmedia Network has acquired Sprouter, an Internet content company that specialises in the areas of technology, digital media, entrepreneurship and startups. Through the acquisition, Sprouter becomes a division of Postmedia Network. Sprouter will continue to operate under the Sprouter name and branding under the leadership of Sarah Prevette.

“We are thrilled to welcome Sprouter to the Postmedia Network family,” said Paul Godfrey, President and CEO. “Sprouter complements our Digital First strategy and brings a spark of digital entrepreneurship to our family of brands.”

Founded in 2009 by Sarah Prevette, Sprouter enables entrepreneurs to ask a question, browse relevant content, comment on answers, and share advice with their networks. Sprouter also produces the Sprouter Weekly entrepreneurship publication, and hosts Sprout Up events.

Canada, Toronto

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DMGT sells GLM to Providence Equity Partners

October 4, 2011 — Fusion DigiNet

DMGT has sold George Little Management (GLM) to Providence Equity Partners. Providence is acquiring GLM through a new holding company led by Charles G. McCurdy, who most recently served as Chief Executive Officer of Canon Communications, a leading producer of trade shows, publications, and digital and data services.

The total consideration was US$173 million(£111 million) of which $154 million (£99 million) was cash with the balance being an interest-bearing note. In addition, DMGT benefit from selling the business with negative $7 million (£4 million) in working capital.

GLM was founded by George F. Little, in 1924, and acquired by dmgt in 2007, and is part of the dmg:events portfolio. The company is forecast to turnover $71 million and make $26 million of pre-tax profits. GLM employs some 100 people, with offices in White Plains, NY, Atlanta, GA and Naples, FL.

GLM currently produces 15 tradeshows. Alltogether, these events have around 11,000 exhibitors in 1.8 million net square feet of exhibit space, and attract approximately 345,000 attendees.

USA, Providence, RI & White Plains, NY & UK, London

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Scripps to buy nine television stations from McGraw-Hill for $212 Million

October 4, 2011 — Fusion DigiNet
McGraw-Hill is to sell its nine-station Broadcasting Group to The E. W. Scripps Company for $212 million in cash.  The deal is structured as a purchase of stock but will be treated as a purchase of assets for tax purposes, resulting in tax deductions created through the transaction that will be used by Scripps to reduce the net cash cost of the acquisition. The transaction is expected to be modestly accretive to Scripps’ earnings in the first full year of operations of the acquired stations. Scripps intends to finance the transaction with new debt and has secured committed financing for the purchase price.

The Broadcasting Group includes ABC affiliates in Denver, Colorado (KMGH-TV), San Diego, California (KGTV), Bakersfield, California (KERO-TV), Indianapolis, Indiana (WRTV) and Azteca America affiliates in Denver, Fort Collins, Colorado Springs,San Diego and Bakersfield.  The five other stations involved in the transaction – KZSD in San Diego, KZKC in Bakersfield, KZCO in Denver, KZFC in Ft.Collins, Colo., and KZCS in Colorado Springs, Colo. – are low-power stations affiliated with the Spanish-language network, Azteca America.

The nine McGraw-Hill stations, which reach approximately 3 percent of U.S. households and generated revenue in 2010 of $97 million, have roughly 460 total employees.

“This is a terrific opportunity to enter some of America’s most dynamic media markets and tap into the growing Spanish-language marketplace at a very attractive price,” said Rich Boehne, Scripps president and chief executive officer. “The McGraw-Hill stations fit well with our strategy to create economic value through high-quality news and information content that serves both consumers and advertisers through linear television and the exploding array of digital communication devices.

“These stations came up for sale at a good time for Scripps,” Boehne said. “The deal is structured and financed in ways to protect the company’s financial flexibility and our ability to continue investing in emerging media business models. Through this acquisition, we now have the opportunity to extend our local news strategies into markets with big appetites for community-changing journalism.”

The acquisition of the McGraw-Hill stations will extend the Scripps relationship with ABC. With 10 ABC affiliates among its expanded roster of 19 stations, Scripps will be the country’s largest independent operator of ABC stations. The new stations join a Scripps portfolio that includes six ABC affiliates (in Detroit, Tampa, Fla., Cleveland, Phoenix, Cincinnati, and Baltimore), three NBC affiliates (West Palm Beach, Fla., Kansas City, Mo., and Tulsa, Okla.) and one independent (Lawrence, Kan.). The consolidated station group will reach approximately 13 percent of U.S. households.

Morgan Stanley & Co. LLC  acted as financial advisor to McGraw-Hill in the transaction.

USA, Cincinnati, OH & New York, NY

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CheaterVille acquires ZackTaylor.ca

October 4, 2011 — Fusion DigiNet
CheaterVille, a Las Vegas online social media company that provides information about alleged cheaters, today announced the acquisition of one of the largest Celebrity Gossip and entertainment websites in Canada, ZackTaylor.ca.

In a statement to the press, James McGibney, CheaterVille’s founder and CEO said, “By acquiring the rights to ZackTaylor.ca and their sub-domains, we are continuing to expand our reach into the Canadian market by appealing to the millions of viewers who have visited his site since it first launched back in 2007.

Furthermore, we will be rebranding it shortly as the Internet’s first all-inclusive website to find out about exclusive celebrity cheating scandals.  Since CheaterVille’s recent expansion intoCanada, we are easily on track to surpass 250,000 subscribers since our company’s launch on Valentine’s Day of this year. I want to thank all of our Canadian fans for their unbelievable support in our continued effort to fight infidelity!”

USA, Las Vegas, NV & Canada, Totonto

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Rhapsody is to acquire Napster

October 4, 2011 — Fusion DigiNet

Rhapsody is to acquire Napster from Best Buy Co. The transaction will combine the subscriber bases of the two largest premium on-demand music services in the United States. Under the terms of the agreement, Rhapsody will acquire Napster subscribers and certain other assets, and Best Buy will receive a minority stake in Rhapsody.  The transaction is expected to close on or around November 30, 2011.

“Rhapsody has demonstrated that it has what it takes to build a profitable business in the increasingly competitive on-demand music market,” said Chris Homeister, senior vice president and general manager of entertainment for Best Buy. “We are confident they are the right partner to provide Napster’s existing subscriber base with an immersive digital music experience moving forward.”

“This is a ‘go big or go home’ business, so our focus is on sustainably growing the company,” said Irwin. “We’re excited to welcome Napster music fans to the best on-demand music experience anywhere.  Our new members will have more places to connect to the music they love and to discover new favorites, guided by Rhapsody’s rockstar editorial team and the tastes of other Rhapsody members via our innovative social features.

USA, Seattle, WA

 

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Scripps Networks Interactive and Virgin Media complete UKTV Transaction

October 3, 2011 — Fusion DigiNet

Scripps Networks Interactive has completed the acquisition of Virgin Media’s stake in UKTV, one of the United Kingdom’s leading multi-channel television programming companies, following regulatory approval in the Republic of Ireland and Jersey.

In completing the acquisition, Scripps Networks Interactive has acquired a 50-percent common equity interest in the UKTV partnership and the outstanding preferred stock and debt owed by the partnership to Virgin Media. BBC Worldwide, the commercial arm and wholly owned subsidiary of the British Broadcasting Corp. (BBC), is the other 50-percent stakeholder in UKTV.

Formed in 1997, UKTV attracts about 39 million viewers a month across its portfolio of 10 lifestyle, entertainment and non-fiction (factual) programming channels. UKTV brands include Home, Good Food, Dave, Watch, GOLD, Alibi, Eden, Blighty, Yesterday and Really. UKTV also operates complementary websites for each channel brand.

UKTV channels air award-winning shows from the BBC in addition to original programming. All of the UKTV channels are available on Sky Digital and Virgin Media. Dave, Yesterday and Really also are available on Freeview.

USA, Knoxville, TN & UK, London

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Kaboodle to merge With StyleSpot

October 3, 2011 — Fusion DigiNet

Social shopping business Kaboodle has merged with StyleSpot, a fashion publisher and shopping engine. Kaboodle is a subsidiary of Hearst Corporation and StyleSpot is a Los Angeles-based start-up backed by Idealab. Together, both companies will offer content, community and commerce to be distributed everywhere women shop online. Hearst will become the largest shareholder of the combined company as a result of the merger.

Rafi Gordon and Alex Amin, co-founders of StyleSpot, will continue as co-CEOs and oversee the combined company, with Gordon overseeing strategy, operations, business development and sales, and Amin overseeing content, product development, PR and marketing. Steven Chien, chief operating officer of Kaboodle, will report to Gordon. Both StyleSpot.com and Kaboodle.com will continue to operate as individual websites.

Commenting on the merger, Gordon said: “StyleSpot’s distribution platform spans mobile, Web, social and email, and enables the company to deliver personalized product recommendations and compelling, monetizable shopping content very efficiently. Combining Kaboodle’s community with StyleSpot’s content and commerce platform will allow us to reach more women and serve their shopping needs even better than before.”

StyleSpot was founded in 2009 by Gordon and Amin. Both executives have more than 13 years of experience as online entrepreneurs and operators focusing on data aggregation, distribution and monetization. Prior to founding StyleSpot, Gordon and Amin founded Baseline Research, a film and television database company in 1999, which was sold to The New York Times Company in 2006.

USA, San Mateo, CA

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Interpublic acquires majority control of S2Publicom

October 3, 2011 — Fusion DigiNet

Interpublic has acquired majority control of S2Publicom, ranked among the top five public relations firms in Brazil. The operation will represent an important part of Weber Shandwick and Golin Harris growth plans in the region. Terms of the deal were not disclosed.

S2Publicom was formed last year by the merger of S2 and Publicom, two major public relations firms that have been operating in the country for more than two decades, both of which were affiliates of Weber Shandwick and Golin Harris. The firm has two offices in Sao Paulo and one in Rio de Janeiro. It employs 125 professionals with broad communications and media relations expertise, as well as specialists in crisis management, media training and digital communications.  S2Publicom has been at the center of marketing communications in Brazil, providing clients with strategic communications insights and counsel in multiple sectors such as corporate, consumer, technology and healthcare. McDonald’s, Petrobras, HTC and Gol Airlines are among the agency’s long-standing clients.

Jose Luiz Schiavoni, one of S2Publicom’s founding partners, will continue to lead the company as CEO. Schiavoni has been a pioneer in the public relations industry in Brazil. In addition to his client-related experience, he has been a vocal advocate for continuous improvement of professional standards and ethics in public relations. He also served as the president of the Brazilian Association of Public Relations Agencies (Abracom) for four years, from 2004 to 2008. Two of the other three original founding partners, Luciana Gurgel and Aldo De Luca, will continue to be senior strategists and client counselors.

Harris Diamond, chief executive officer of Interpublic’s Constituency Management Group, which includes Weber Shandwick,Golin Harris and other companies with operations in Brazil including FutureBrand and Octagon, commented about the acquisition:  “Our successful past collaborations with S2Publicom convinced us that they are the right partners to help Weber Shandwick and Golin Harris support their multinational clients and to continue to build a great business together in what is clearly one of the world’s fastest growing economies. Brazil is one of the largest consumer markets in the world, and as it plans to host the FIFA World Cup™ 2014 and the 2016 Olympic Summer Games, we see great opportunities to build our presence in the market.”

Schiavoni added, “Through our long association as an affiliate partner with Weber Shandwick and Golin Harris, our agencies have built a relationship of mutual trust. The experience of bringing the best thinking to our clients has demonstrated that our business philosophies and styles are a good fit.  We are very excited that we can now offer our staff more opportunities for professional development and can offer our clients a global reach.”

USA, New York, NY & Brazil, Sao Paulo

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Vantage Media and BrokersWeb merge

October 3, 2011 — Fusion DigiNet
Vantage Media and BrokersWeb have completed a merger to create one of the world’s largest online performance marketing companies.  The combined entity will focus on delivering new customers, via clicks and leads, to clients in the Education, Insurance and Moving verticals.

“The combined company will deliver unmatched value for clients and media partners,” said Patrick Quigley, Vantage Media CEO who will lead the combined company. “The transaction allows both companies to build upon and leverage the strengths of each other. Our technology platforms and media capabilities are highly complementary and the combination will create immediate revenue opportunities and additional value for our clients and media partners.”

“We are more confident than ever with the prospects of the BrokersWeb business, and welcome the resources Vantage Media will bring,” said Matias de Tezanos, CEO and founder of BrokersWeb, who will continue in that role and lead the combined company’s international expansion. “This transaction enhances BrokersWeb’s leadership position in technology, advertising clients, audience and publishers, while enabling us to create additional meaningful revenue opportunities for our partners.”

The BrokersWeb business will retain the “BrokersWeb” name and all of its management, while gaining additional technical, financial and human resources to grow the business.

USA, El Segundo, CA & Miami, FL

 

 

 

 

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