In 2008, there were 707 merger, acquisition and capital raise transactions in the online sector of media with a total deal value of $16.9 billion, a 62% decrease over the dollar value in 2007, according to a report (pdf) from Peachtree Media Advisors, Inc.
Though the total dollar value was down overall, the 707 transactions represented 92 more than the 615 in 2007 and included 348 capital raises, substantially more than the 273 capital raises in 2007, the report said.
The year also saw 359 digital media acquisitions that involved a change of control, though there were significantly fewer large scale transactions in 2008 and substantially more small niche-oriented acquisitions than in 2007.
Transaction Value by Sector
In 2008, overall reported transaction deal value was $16.9 billion in all of the US online media sectors: Consumer, Business, Mobile, Enabling and Commerce.
The 2008 reported deal value by sector:
Transaction Value by Category
Led by the $1.8 billion acquisition of CNET by CBS, the Consumer Publishers & Aggregator category had the highest level of reported transaction value with $3.4 billion in deal value in 2008. The next highest category was B2B, with $2.7 billion in reported deal value, which includes Hellman & Friedman’s acquisition of Getty Images and Nielsen’s acquisition of IAG Research. With the exception of the B2B category, virtually all categories experienced lower reported M&A deal value in 2008 vs. 2007, Peachtree said.
Although the Enabling, Analytics and Ad Serving category had the fourth-highest level of reported transaction value in 2008, this category had the largest percentage increase in capital flowing to it in 2008. Companies that provide tools to online media, i.e. optimization, analysis, applications or more effective content delivery, raised the most capital in 2008.
Transaction Volume in 2008
In 2007, the Consumer Publishing, Aggregator & Ad Supported Content category had the highest number of transactions, but in 2008 this category – which had 85 transactions – was completely eclipsed by Social Networking with 102 transactions, Online Video & Gaming with 88 transactions, and Web Applications & Enabling with 86 transactions, the report said.? The increase in deal volume to these sectors is primarily because of an increase in venture capital targeting social networking companies and online video companies in the beginning of 2008 as well as a substantial increase in capital flowing to the Web Applications, Enabling & IT category throughout the year.
Transaction Volume in 2008 and 2007
The analysis revealed significant decreases in the number of transactions completed in the following categories: B2B; Consumer Publishing & Ad Supported Content; and the Travel, Rental & Housing category. There were substantially more transactions completed in the Web Applications & Content Delivery Networks; Ad Serving & Analytics; Video & Online Gaming; and Social Networking Categories in 2008 vs. the previous year.
Total Capital Raised in 2008 and 2007
In 2008, $3.5 billion in reported deal value of venture capital flowed into all sectors of media, representing a 22% increase over the amount of reported $2.9 billion in capital raised in 2007, the report noted. The Enabling category had the largest increase in the amount of capital raised attracting $892 million in 2008, a 124% increase over the $398 million raised by the sector in 2007. The Mobile sector also saw significant gains in investment capital. The Mobile category raised $341 million in investment capital in 2008, representing a 488% increase over the $58 million raised by the sector in 2007.
The top five sectors and number of equity raises in 2008:
- Video & Online Games: 59 capital raise transactions
- Social Networking: 57 capital raise transactions
- Web Applications/Enabling/IT: 47 capital raise transactions
- Mobile: 35 capital raise transactions
- Blogging/User Generated: 27 capital raise transactions
M&A Deal Volume in 2008
The majority of M&A transactions in 2008 occurred in the consumer sector of online media. The consumer sector accounted for 329 transactions, representing 46.5% of the total transaction volume in 2008. The online business services sector accounted for 154 transactions, representing 21.8% of the total transaction volume in 2008. The Mobile and Enabling, Analytics & Ad Serving categories experienced a significant lift in deal volume in 2008, with 41 Mobile and 135 Enabling transactions during the year.
The introduction of the iPhone and the proliferation of smart phones in the consumer market motivated investors to seek out companies providing mobile interactive marketing services or building applications for these handsets, Peachtree said. The Commerce category experienced a decrease in deal volume primarily because of problems with the economy. There were only 48 transactions in the Commerce category, representing 6.8% of the total deal volume in 2008. This number was lower than the previous year. Consumer and Enabling, Analytics and Ad Serving sectors had the highest number of capital raises in 2008.
Out of Home M&A
In 2008, there were 18 strategic acquisitions involving a change of control and 13 capital raises for the out-of-home sector of media, the report stated. Out-of-home media (OOH), which encompasses digital signage, billboards, alternative outdoor, street furniture, transit and place-based media, had $556 million of reported M&A transaction value in 2008.
2008 saw general consumer digital networks fallout of favor as investors sought out niche opportunities in highly targeted channels with endemic advertising bases, Peachtree said. Investors looked for networks that were close to the point of purchase that could influence purchasing decisions.