Review reveals explosion in digital media deals in 2010

Peachtree Media Advisor's 2010 Mid-Year Digital Media M&A Review has revealed a huge rise in the number of digital media deals in the first half of 2010. Deals skyrocketed by 68 per cent to 546.

The review from the New York-based investment bank, which provides M&A advisory services to growth and middle market digital media companies in the U.S. and abroad, also revealed that the overall value for those deals soared by 117 per cent to $9 billion.

'Rapid innovation in mobile and cloud computing, social gaming growth, and the rising popularity of group commerce and private sales' each contributed to the increase in M&A activity, said the report. The only category that showed a decline in the number of transactions in the first half of 2010 was Lead Generation and Customer Acquisition, which fell from eight deals in the first half of last year to seven over the same period this year.

Meanwhile, valuations on individual deals dipped down from levels witnessed at the end of last year following a sell-off in the equity markets in May and June. Thanks to the $3.4 billion acquisition of Interactive Data Corporation by Silver Lake and Warburg Pincus, one category - Online B-to-B Content - managed to report increased valuation multiples as a whole.

Elsewhere, revenue valuations for Consumer, Advertising and Search companies dropped alongside E-commerce companies.

The report showed that digital mergers and acquisitions in the first half of this year not only exceeded the 103 deals from the first half of 2009 but also the 221 recorded over the whole of 2009. The 224 transactions in the first half of this year totalled a reported $6.8 billion, with the highest number being in the enabling, analytics & ad serving sectors, with 63. Consumer followed close behind with 62, while the mobile sector managed 36 deals, three times as many as in the first half of last year.

The report also found that traditional media companies continued to make small investments into emerging digital trends in an attempt to diversify revenue. Forbes made a foray into content aggregation with its purchase of True/Slant and Time, Inc. bushopping engine StyleFeeder.

Meanwhile, Google and social gaming firm Playdom made a combined thirteen acquisitions in the first half, while Facebook and Twitter made three small, strategic acquisitions each.

Mobile phone usage has changed beyond all recognition, said the report, spurring rapid adoption of the mobile web. Only 45 per cent of the time Apple iPhone users spend on their phones is spent making calls and more than 89 million people accessed the internet from their phones over the last year - an increase of 25 per cent from a year ago - according to the Pew Internet and American Life Project. Apple bought mobile ad network Quattro Wireless in January for $275 million to maintain control on its existing mobile offerings.

Looking ahead, social gaming is tipped to be one of the hottest areas of expected M&A activity as strategic buyers jostle for position in this up and coming sector.

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