8 Reports Reveal Multiples Paid for Companies in the Online, Media and Software Industries

8 Reports Reveal Multiples Paid for Companies in the Online, Media and
Software Industries

NEW YORK, March 2 /PRNewswire/ -- Berkery Noyes releases its Outlook &
Strategies report, which presents thoughts on the coming year along with links
to eight Merger & Acquisition trends reports that show values paid for
companies in the Online, Media, Software industries as well as specific niche
segments such as healthcare, finance and education.

Outlooks and Strategies 2009

Glass Half Full

Amid so much uncertainty, there are at least a few predictions we can
confidently make for 2009:

1. Demand for information will continue to grow.
2. Middle-market M&A transactions will continue to get done.
3. The sun will come up tomorrow.

Beyond that, there's not a lot to be certain about in the coming year. But
that just may be enough.

Current Market Outlook
Though the pace of Mergers & Acquisitions activity has slowed, and the highly
leveraged deals of the past few years have disappeared, large strategic
companies continue to seek growth through acquisition, private equity
investors still have capital to deploy, and private owners are looking for
timely exit strategies.

Prices are still strong for high-quality assets. Demand still exists for
businesses that can demonstrate growth, profitability and a solid
product/service. True, you won't find ready financing on covenant-light terms,
and leveraged transactions are very difficult, but most strategic buyers in
our markets are healthy, qualified and willing to pay cash.

Over the next 12 months, many highly leveraged but otherwise sound companies
will be forced to come to market. While we don't anticipate a flood of these
deals, they will bolster overall middle-market M&A activity in 2009.

Restructuring vs. Selling
Companies that have taken on unsupportable levels of debt, or whose
performance is flagging in a slow economy, may need to restructure their
operations and their balance sheets in 2009. Restructuring will enable some
over-leveraged or under-performing businesses to survive the current
challenging economic environment and perhaps prosper in the future when
conditions improve, by strengthening their financial, strategic and
competitive positions.

Not every business is a candidate for restructuring. Generally speaking, the
stronger the underlying business model, the better the chances that a
restructuring will add value to a debt-burdened business. Berkery Noyes has
recently teamed with restructuring specialists Seneca Financial Group to
provide restructuring advisory services to middle-market companies in our core
markets segments.

To read the full report Click Here.

Alternative Financing
While we expect tightness in the credit markets to continue at least into the
second half of 2009, more companies are turning to alternative means of
financing acquisitions, restructurings and day-to-day operations.

Among the more notable trends is the use of mezzanine debt, which offers an
alternative source of capital to selling into a weak market, or as a stop-gap
measure to tide a company over until a sale, IPO or more traditional financing
can be accomplished. Typically, these instruments are senior only to equity.
Because mezzanine capital is at inherently greater risk than secured or more
senior debt, it is more expensive.

Other alternatives to traditional financing are minority investments, sellers
taking paper from the buyer, and so-called "club deals" involving multiple
sources of debt. These alternatives tend to require an investment banker as an
intermediary who is knowledgeable in the given market and can accurately
assess the asset values being financed.

Timing
While we have never been fans of trying to time the market, we do advise
private sellers to prepare their businesses now for a transaction when markets
turn around. The climate will eventually shift -- whether that happens in the
second half of 2009 or the first half of 2010 -- and sellers that have
tightened their operations, cleaned up their financials, and prepared for a
sale will be in a better position to capitalize on improving conditions. We
believe that when the break comes it will happen quickly; those prepared to go
to market will benefit from pent-up demand.

One-On-One
The final trend we'll note is the increasing popularity of the one-off M&A
transaction. We are managing more of these on both the buy-side and the
sell-side than at any other time in the past two decades. In essence, these
transactions replace the traditional controlled auction involving a targeted
universe of potential buyers.

On the buy-side, one-on-one deals can be quick, uncomplicated and
confidential. A buyer knows exactly what type of business or product it needs
to fill a gap in its offering, and retains us to identify and approach the
target, then execute the acquisition.

For sellers, the one-off approach is a quiet, discreet method of selling a
business. Often, buyers in one-on-one situations pay a premium for the target
and avoid alerting competitors, customers and employees that the company is
"in play". Sellers of less obviously attractive assets are more willing to
consider one-on-ones than before, looking to avoid the potential risks of a
failed auction.

In both the buy-side and sell-side situations, the keys to a successful
outcome are market knowledge and global contacts. Our buy-side clients rely on
us to find the right business from among the 45,000 we track in our database,
and value it accurately, while our sell-side clients trust us to identify the
best buyer based on some 14,000 transactions we've tracked in recent years and
negotiate a deal that returns full value to shareholders while accommodating
the seller's non-financial objectives.

Looking Ahead
There is no doubt that the current market is challenging to companies across
the information industry spectrum. While certain segments are undoubtedly
suffering, others are holding up well (it's not a bad time to be in the
healthcare information or regulatory compliance software business, for
example).

But no matter the particular industry vertical or market niche, there are at
least two fundamental truths that prevail no matter the economic climate: (1)
There is still no substitute to seeking growth through acquisitions and,
therefore, (2) There are always buyers for good companies. The key to a
successful outcome is an advisor who knows the market, understands the
business, and has the tenacity and expertise to get the job done. As it has
for more than 25 years, through up cycles and down, Berkery Noyes has done
exactly that for our clients. No matter what happens in 2009 and beyond, that
will never change.

2008 SOFTWARE INDUSTRY M&A
Although both the volume and value of Software M&A transactions decreased in
2008 from the two prior years, there are bright spots in an otherwise down
market. The volume of infrastructure transactions actually increased last
year, albeit only slightly, from the number of deals recorded in 2007.

Overall transaction volume decreased by 12 percent last year from the 2007
level while aggregate transaction value decreased by 51 percent, reflecting
fewer large-scale (and typically highly leveraged) transactions in favor of
middle-market deals. Happily, valuations were generally steady, with EBITDA
multiples dropping by less than 2 percent year over year--and still well above
the 2006 median multiple, suggesting that buyers are still willing to pay
solid prices for attractive acquisitions.

To read the full report Click Here.

2008 ONLINE INDUSTRY M&A
While the total number of Online Mergers & Acquisitions transactions decreased
by only 9 percent in 2008 from the previous year, the aggregate value of those
transactions fell by 76 percent. These results underline the effect that
tighter credit markets are having on overall media M&A activity: the large,
highly leveraged transactions that drove aggregate values higher in 2006 and
2007 all but disappeared last year, while the market for mid-sized M&A
transactions is still relatively strong.

Valuation multiples of companies that were merged or acquired in 2008 declined
from 2.3 times revenues in 2006 to 1.7 times in 2008, a level consistent with
historical valuations in the industry. We believe that these more supportable
and sustainable valuations will encourage a resumption of M&A activity in the
year ahead.

To read the full report Click Here.

2008 PRIVATE EQUITY M&A
Private equity transactions were most affected by tightening credit in 2008,
as these buyers typically leverage their investment with significant debt.
Total transaction volume in 2008 decreased by 33 percent over 2007, from 291
deals to 196 in 2008. The aggregate value of these transactions declined even
more sharply, from $109.70 billion in 2007 to $23.92 billion last year, a drop
by more than three-fourths.

Bucking that trend was the Healthcare and Pharmaceuticals market, where the
total value of private equity-sponsored transactions more than doubled, to
$4.16 billion in 2008 from $1.65 billion the prior year. Surprisingly, there
was no change in the way private equity investors valued their acquisitions in
the information industry: expressed as a multiple of revenues, enterprise
valuations remained flat over the three-years 2006 - 2008 at a constant
multiple of two times revenue. Valuations as a multiple of EBITDA showed only
moderate variation, actually rising in 2008 to 11.8 times earnings (before
interest, tax, depreciation and amortization) from 10.9 times EBITDA in 2008.

To read the full report Click Here.

2008 INFORMATION INDUSTRY M&A

Mary Jo Zandy, Managing Director

There were 231 fewer M&A transactions in the broadly defined information
industry, representing a decrease by 13% from 2007, when 1,716 deals were
completed. The aggregate value of the 1,485 deals closed last year was $85.92
billion, a decrease by 70% from the 2007 amount. That median enterprise
valuations declined by just 20%, from a multiple of 2.5 times revenue in 2007
to 2.0 times last year, it stands to reason that the decline in transaction
volume occurred at the top end of the value range, with little change in the
number of smaller to mid-sized transactions over the past three years. In
fact, fully one-third of M&A transactions involved companies valued between $7
million and $55 million.

This pattern is likely to hold in 2009, with a relatively steady pace of small
to mid-sized all-cash M&A deals being completed across the information
industry spectrum, and a dearth of large, leveraged transactions. Strategic
players in the information markets continue to seek acquisitions that can
provide new customers, new technologies and/or access to new markets, and
these often entail niche businesses that bolt on or tuck into existing
operations.

To read the full report Click Here.

NOTABLE TRENDS IN OUR CORE MARKETS

Healthcare & Pharmaceutical Information

Tom O'Connor, Managing Director
Jeffrey Smith, Managing Director

While there is no such thing as a truly recession resistant market, healthcare
information comes closer than most. While the pace of M&A may slow in 2009,
strong demand persists for companies whose products or services either improve
the quality of care or lower its cost. Other trends include:

-- strategics looking to acquire add-on opportunities;
-- a growing preference for software-based solutions;
-- unique, marquee products/companies will command premium value,
"me-too" providers will not;

The pharmaceutical information market will continue to demonstrate strong
demand in the areas of pharma technology, proprietary data, compliance tools,
drug safety information. Value drivers in this market won't change: brand
leadership and patient outcomes are key.

To read the full report Click Here.

Education

Chris Curran, Managing Director
Mark DeFusco, Managing Director
Vivek Kamath, Director
Adam Newman, Director

Within the broad education market, certain segments perform better in a weak
economy. Enrollment in career colleges is increasing (along with revenues and
profits) as displaced workers seek to bolster their skills to capture new
employment opportunities. An increase in Pell Grants is providing more
liquidity to the market, while the schools themselves are more inclined to
carry student debt on their own balance sheets. As schools expand their
capacity, ancillary beneficiaries are suppliers of marketing services that
help build or retain enrollment.

On the K-12 side, data will continue to drive instructional and administrative
spending. We expect fewer M&A transactions, with those that do get done
centered on businesses that provide management and data tools--student
information systems, data warehousing, business intelligence & analytics--that
help schools do more with less. Other winners include publishers of non-basal
textbooks, digital curriculum, and providers of learning resources that
improve outcomes.

To read the full report Click Here.

Financial Technology & Services/Business Information

Peter Ognibene, Managing Director
Dick O'Donnell, Managing Director
John Guzzo, Director

With continued tight lending, commercial banks will turn more and more to
fee-based services like wealth management, which will drive M&A activity as
the hundreds of sizeable independent investment advisors are consolidated.

Amid all this uncertainty, providers of financial services are re-thinking
their strategies. As they navigate the current turmoil, the question echoing
through nearly every corner office is "what do I want to buy or sell to be in
good shape 12 to 18 months from now?" Many are turning to advisors like
Berkery Noyes for ideas and opportunities.

To read the full report Click Here.

Media & Marketing Services

Kathleen Y. Thomas, Managing Director
Mai-Anh Tran, Director

As total ad spending shrinks, marketers continue to look for demonstrable
returns on their marketing dollars. We will continue to see those dollars
skewing toward digital marketing media, at the expense of print and broadcast.
Face-to-face tradeshow and exhibition marketing is still a highly effective
product information and marketing vehicle, though short-term cuts in travel
budgets will impact some 2009 events.

While we expect fewer M&A transactions in 2009, strategic buyers will continue
to seek complementary acquisitions to supplement existing revenue streams in
their portfolios. We also anticipate an increase in divestitures of
highly-leveraged properties acquired over the past few years.

To read the full report Click Here.

SOURCE Berkery Noyes

John Shea, COO of Berkery Noyes, +1-212-668-3022