Information Services Deals Expected to Heat Up in 2010
A new survey conducted by New York-based boutique investment bank Gridley Company LLC (Gridley Co) reveals a high level of optimism for mergers and acquisitions (MA) in the information services industries with more than 80 percent of respondents noting they would be active in information services deals as a likely buyer or seller in 2010 with 23 percent of participants responding as a buyer 37 percent responding as a seller and 22 percent responding as both
When asked what type of transaction they plan on in 2010 29 percent said they would acquire a private company 28 percent noted they would be involved with a sale of a company 19 percent responded with a sale of a portfolio company and 28 percent said they would be fundraising in 2010 Participants were also particularly bullish on an expected increase in public company deals in 2010 More than 75 percent of respondents noted they expect to see more public company strategic deals this year
That positive sentiment was also captured in responses on the overall MA environment with nearly 85 percent of those surveyed expecting 2010 domestic deal volume to increase over last year with more than 65 percent saying volume will grow by more than 10 percent in 2010 and 23 percent responding that volume will increase more than 25 percent
Clearly our respondents are feeling more confident about their companies and about the overall economy We seem to have turned a corner and the MA markets are rapidly improving said Linda Gridley Founder and CEO of Gridley Co and host of Gridleys Ninth Annual Information Marketing Internet Financial Technology Outsourcing Services Conference held last month at the Jumeirah Essex House in New York City These statistics back up what weve been hearing from our clients and network dealmakers are looking to ensure their businesses are positioned for growth as the economy turns around and MA will play a major role in their plans
Gridleys MA survey was designed to gain insight into deal activity and trends in the Internet services marketing services and financial technology sectors of the information services industry over the next 12-18 months Gridley surveyed approximately 80 senior executives from these sectors The respondents also revealed that in 2010 the Internet and marketing services sectors is where most buyers and sellers expect to be active Not surprisingly when asked which Internet company (AOL Google Microsoft and Yahoo) would execute the highest number of deals 67 percent answered Google 21 percent responded Microsoft and 8 percent answered AOL
Of the private equity investors who participated in the survey 50 percent of respondents said they expected to do up to five deals in 2010 while 28 percent answered they would anticipate making between five to ten transactions this year Survey respondents also uniformly noted their increased confidence in the MA lending environment 64 percent expected the lending environment to continue to improve and 22 percent believed it would even out at current levels
Regarding valuations Linda Gridley remarked This year valuations will be more balanced for buyers and sellers versus years past when expectations were hard to meet If companies were valued at 12x in 2007 most likely they will be in the range of 7x-10x in 2010 These more reasonable valuations should also encourage more deal activity
Gridleys recent conference in early January featured presentations from approximately 30 leading private companies in the information services sector as well as discussion panels featuring industry leaders Since 2004 150 private companies have presented at Gridley Companys Annual Conference with nearly 45 percent going on to do successful liquidity events This years conference drew attendance from over 475 senior executives and financial investors representing approximately 320 companies and private equity firms.
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