M&A activity up significantly in 2010
Marketing merger and acquisition (M&A) activity increased dramatically in 2010, according to reports from investment banking services firm The Jordan, Edmiston Group (JEGI) and investment banker Petsky Prunier.
M&A activity in the media, information, marketing services and technology sectors amounted to $43.3 billion last year, according to JEGI's year-end report.
Both the number of transactions (845) and total value of them increased 39% compared to 2009. The majority of activity took place in the online media, marketing services and mobile media sectors, which accounted for 73% of deal volume and more than 50% of overall deal value.
“There was a backlog of healthy, sellable businesses that did not trade during 2008 and 2009,” said Tolman Geffs, co-president of JEGI. “Companies guarded their cash during the recession and built up record cash positions. Now they need to invest.”
Petsky Prunier's year-end survey showed similar results. According to the December 31 report, M&A activity in the marketing, information and digital media and commerce industries grew 49% in 2010.
“The economic uncertainty that was prevailing throughout the downturn manifested itself in the caution that executives had toward completing acquisitions,” said John Prunier, partner at Petksy Prunier. “While executives were cutting back on 401(k) matching, they weren't going to be making risky or expensive bets on acquisitions.”
Petsky Prunier found that the “cautious” two-year period began to subside by 2010 when executives “took a much more applied focus toward acquisitions.”
The Petsky Prunier study also found that aggregate transaction value increased 88% compared to 2009. The firm tracked 1,019 transactions with $51.5 billion in value. The digital media and commerce segment was the most active, with 308 transactions, while the software and information segment saw the highest value of transactions, with $16.7 billion in deal value.
Geffs said the market is “still cautious and prudent,” but he argued “marketers should be optimistic.”
“Just like our grandparents remembered the Great Depression decades after it ended, we're seeing the same discipline today,” Geffs said.
He speculated that the discipline executives are showing in their M&A spend will be beneficial to their companies in the long run, especially because one never knows how long a good economy will last. “Frothy markets might be good while you're in them but we know what happens afterward.”