(M2 PressWIRE Via Acquire Media NewsEdge) A new report from Heernet Ventures Ltd concludes that 2012 was an active year for both corporate M&A activity and investing by the private equity/venture capital community. G2Mi Research (part of Heernet Ventures) tracked close to 6,500 deals in 2012; the aggregate value of deals (for the 3,040 deals where value was disclosed) was USD 287 Billion. M&A deals accounted for USD 236 Billion and the remainder were PE/VC investments or rights deals.
In the M&A segment, North America acquirers accounted for 50% of deals by value and close to 60% by deal volume; the remainder was primarily accounted for by Europe and Asia. North American acquirers accounted for a smaller share of deals in the telecom sector and the highest share in the technology sector. Examples of the largest transactions included the acquisition of a 70% stake in the US telecom operator Sprint Nextel by the Japanese company Softbank USD 20.1 Billion. Another Japanese company was also involved in one of the biggest deals in the media sector, with Dentsu's acquisition of Aegis for GBP 3.2 Billion.
In the investments segment, the technology and internet sectors continue to lead much of the investment activity by PE/VC funds. The vast majority of the 2,670 deals we monitored were in the less than USD 50 Million category with an average investment per transaction of USD 9 Million in the internet sector.
Commenting on the research, Harjinder Singh-Heer, Managing Director of Heernet Ventures, said " The TMT space continues to be a hotbed of product innovation, with technology advances creating new challenges and opportunities for companies and investors. The poor economic environment also encouraged companies to take a fresh look at their operations, with a view to divesting non-core businesses."
G2Mi Research identified a number of factors which are driving deal activity in the TMT space.
1) Building assets and scale in the digital spaceA key driver of deal activity continues to be the need for traditional media companies to build assets and scale in the digital space. In what we define as traditional digital segments (classifieds, travel, e-commerce), much of the acquisition activity has been around building scale and consolidating market share; examples of this approach include deals done by groups such as Axel Springer and Schibsted to strengthen their leadership in Europe in areas such as classifieds. In the emerging digital segments of social media and mobile applications, traditional media groups have been less active as they have tended to focus on in-house product development.
In the telecoms space, deal activity has been high in areas such as IP-based communications services as traditional operators acquire companies that give them access to technology in video communications, VoIP services and data networks/infrastructure.
Key target areas for investment by venture funds have included mobile applications, productivity software, 'cloud computing' enabling infrastructure and services and analytics software. There have also been a number of large private equity deals where investors see the opportunity to acquire an asset with strong proprietary content and global reach; examples of this include the acquisition of Getty Images by The Carlyle Group and Primera's acquisition of Ancestry.com Inc.
2) Growth in emerging marketsA key area where M&A has been an essential tool for growth is the drive by large media companies to expand into emerging markets. Whilst regulations preventing foreign direct investment (FDI) or majority ownership continue to be an obstacle, the trend in most of the attractive destinations is towards increasing liberalisation. In India, the relaxation of FDI rules in the television broadcasting sector has seen a number of international broadcasters form joint ventures and make outright acquisitions.
In sectors where FDI restrictions are typically absent, such as marketing services, business media and education publishing, M&A activity by the international players has been high with groups such as UBM Plc, Aegis Group, Publicis and WPP Group making a number of bolt-on acquisitions to bolster their presence in Asia and Latin America.
In terms of private equity investment, much of the activity in emerging markets has been by venture funds in the technology space. Funds that were particularly active in 2012 include Sequoia Capital, Norwest Venture Partners, Accel Partners and Intel Capital.
3) Corporate restructuringThe challenging economic conditions of 2012 have led to many companies divesting assets, either because the assets in question are under-performing or there is a need to strengthen the parent company's balance sheet. Examples include RCS MediaGroup divesting its French publishing operation, Flammarion Group (acquired by Gallimard Group) and Ten Networks selling its outdoor media business in Australasia.
Corporate restructuring has also created opportunities for private equity funds to pick up attractive assets that are likely to provide good returns once the global economy recovers or as technology provides new growth opportunities. Examples include the acquisition of McGraw-Hill's education publishing operation by private equity funds managed by Apollo Group. For the new owners, the education sector has excellent growth prospects in emerging economies, but is likely to require substantial investment as digital technology changes the nature of delivering learning content.
In the telecom sector, operators faced with growing competition and the need to make substantial investments in network and transmission infrastructure, have tended to divest their infrastructure assets. In some cases, these have been pooled with other operators. Examples include American Tower Corp's acquisition of tower assets from Telefonica Chile SA and Crown Castle International's agreement with T-Mobile USA to lease approximately 7,200 towers for a total consideration of USD 2.4 Billion.
For a free copy of the report, visit www.G2Mi.com or email email@example.com.
Heernet Ventures' G2Mi Research service maintains one of the most comprehensive deal databases in the TMT space, capturing deal activity across M&A, private equity/venture capital investments, rights deals and major partnerships/joint ventures. Deal activity is monitored on a daily basis by a dedicated team of industry analysts and subscribers to the service can use a variety of search functions and download data in a report format or as an Excel file. The transactions database is part of our online business intelligence service, G2Mi.com which provides access to a wide range of industry and company analysis.
Heernet Ventures is a UK based advisory and research firm specialising in the global TMT sector.
For further details, please contact:
Heernet Ventures Limited
Tel: +44 (0) 208 180 7223
CONTACT: Harjinder Singh-Heer
Heernet Ventures Limited
Tel: +44 (0) 208 180 7223
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