h2 2020 | media talk 16
media talk | h2 2020
17
THE MEDIA PORTFOLIO
THE MEDIA PORTFOLIO PE’S LOVE-INWITH ADVERTISING AND MARKETING
Even private equity – no stranger to risk – was not entirely immune to the unique challenges of 2020. Deal volumes show the vacuum effect that the pandemic had on M&A. And yet, PE remained active in discussions around prospective deals, and global activity picked up significantly in H2 – in fact, the number of global PE-related deals increased by 19% in the second half of the year. PE proved resilient in an extraordinary year dominated by the need to provide liquidity to portfolio companies and find effective ways to assess value. Fewer exit routes meant a relative spike in secondary buy-outs (SBOs), but PE again played a leading role in driving acquisitions. Deal flowwill take some time to rebound as the pace of recovery, regulatory risks and changing demands continue to confound expectations. Buy-and-build deals remained on pace from previous years, demonstrating the value placed on digital content and health-related offerings in 2020. H2 saw a clutch of buy-and- builds, includingArsenal Capital’s takeover of healthcare communications firmCello Health PLC via PharmaValue Demonstration for a recommended cash offer of GBP £178.8m.
In many ways, and with a few notable exceptions, the advertising and marketing world has not historically been a natural ecosystem for PE to thrive. Businesses that rely on the vagaries of creativity, with talent locked up in individuals, may look a little too risky for the PE mindset, which tends to prefer more robust models offering predictable revenues and greater accountability, such as subscription-based platforms and software.
deal focused on enhancing data capabilities, following Norvestor’s acquisition of a 60% stake in CapMan in 2018. In March, US-based PE firm Clayton, Dubilier and Rice (CDR) announced its intention to take healthcare and communications group Huntsworth private through a recommended cash offer. The deal completed in May for circa GBP £575 million. Aimed at strengthening Hunstworth’s offering in the medical space, the new backing allowed Huntsworth to embark on its own acquisitions later in 2020, including of Nucleus Global and Cormis Partnership, both medical industry specialists. The management buyout (MBO) of medical communications agency Fishawack in April highlighted two trends of 2020: the contextual premium placed on health-related media, and the rise of SBOs. Bridgepoint Advisors supported the existing management in an MBO valued at GBP £240 million. It was the end of a fruitful era of growth for UK-based PE firm, LDC, which had previously supported an MBO in 2017 for GBP £38 million. Bridgepoint’s investment provided
But advances in programmatic modelling, digitisation and global scalability have combined to make advertising and marketing much more attractive to PE houses. PE houses are attracted to advertising’s increased strategic capability to measure and track effectiveness via data-driven decision-making, witness Blackstone Group’s December acquisition of US-based marketing optimisation platform, Liftoff, in a deal estimated to be around USD $400 million. As a result, even in this COVID-hit era, many businesses focused on social media, digital advertising and publishing are delivering the sort of strong multiples and profitability that PEs look for. More recent subscription options have increased the appeal of publishing and programming too, whilst retaining a premium on creativity and inventiveness. Communications firm North Alliance (NoA), a portfolio company of Norwegian PE house Norvestor Equity, acquired Swedish consultancy Peregrine in August. Peregrine’s digital-first approach will be crucial in supporting NoA’s data-focused development plans. This is NoA’s second
a platform for further M&A activity as Fishawack acquired US-based consulting firm Skysis in April. It then went on to consolidate further with the acquisition of healthcare communications business Hive, including its US-based subsidiary, from Kin and Carta in December, for GBP £13.8 million. This deal provided debt alleviation for Kin and Carta, allowing it to focus on becoming an integrating technology platform. MSQ Partners, the international marketing communications group backed by LDC, acquired publicly-listed advertising company Be Heard Group for GBP £6.2 million in June, in a deal designed to enhance MSQ’s tech and data analytics offerings. Providing these new capabilities can be effectively implemented across MSQ’s global offices, management are hopeful the deal will lead to the acquisition of larger clients, more frequently.
And digital sports platformDAZNGroup entered into talks withTPGCapital in the summer around the possibility of selling a significant stake in a number of its brands. In September, Integrated Media Company (IMC), a portfolio company of TPGCapital dedicated to digital media, announced the acquisition of a majority stake in three online sports news brands fromDAZN Group –Goal.com, SPOXMedia andVoetbalzone.
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