We are happy to announce that we have changed our name to Peachtree Capital Advisors and our blog has also moved — to www.peachtreecapitaladvisors.com/blog.
Here is a link to a very short interview that I did the other day at The Deal regarding the onslaught of IPOs. I was trying to say that there are no buyers for many of these businesses, so the only exit is an IPO. Also, I would like to clarify that I am not insinuating that these are not good businesses, just that there are no buyers for various reasons – diversified media companies are still hurting, tepid and not ready to make large bets.
Peachtree just just released its 2010 Mid-Year Digital Media M&A Review, which is available using the following link:
You may also look forward to Technology and Cleantech reports that will be coming out soon as well.
Peachtree is ecstatic to welcome James Tsay to our team as a Summer Analyst.
James joins us from Columbia University, where he is a rising sophomore majoring in Economics-Mathematics. He is a graduate of Phillips Academy, located in Andover, MA. To date, he has successfully completed internships for Columbia Business School’s Executive Education Program and the Morgan Investment Fund, a private real estate and management firm headquartered in Manhattan.
Discovery’s ad revenue is up in Q1. They are also investing $100 million in O’s new cable network and Oprah.com.
Digital Media Company Valuations are beginning to increase. As seen in the chart below, the average revenue multiple for consumer digital media companies is 3.5x Revenue. This revenue multiple is clearly below the lofty 5x to 10x revenue multiples of 2005 and 2006, but substantially higher than where multiples were at this point last year. Although valuations are increasing due to a better economic outlook and advertising environment, do not expect a super-charged M&A environment. Many transactions are going to involve strategic acquisitions with scale as well as small tuck-in acquisitions of current partner companies. As Hearst’s acquisition of iCrossing for $375 million shows, CEOs are making large strategic acquisitions that take them to a new place with minimal scalability risk (healthy, profitable and growing).
On the other hand, larger companies will also continue cherry-picking small tuck-in acquisitions that complement their existing audiences by adding functionality or niche content. For example, MSNBC acquired BreakingNews.com in January 2010, Time Inc, acquired personal shopping engine StyleFeeder in January 2010 and WebMediaBrands acquired social media site Rotorblog in March 2010.
The outlook for digital media M&A is more optimistic for 2010, but expect more selective deal-making. This year companies have cleaner balance sheets and a re-calibrated strategic focus, which means that acquisitions will have to make business sense. If the CEO cannot make a clear case for the strategic fit to her board, then she will be hesitant to take on the risk.
Peachtree Media Advisors is partnering with Harpia Ventures to introduce investors to the Brazilian digital media space and showcase a pipeline of early and growth stage companies. The following receptions are being held to provide venture capital and institutional investors with insight on the Brazilian digital media M&A marketplace:
March 16 in New York, NY at the Yale Club
March 18 in Boston, MA (location TBA)
March 22 in Redwood City, CA at the Sofitel San Francisco Bay
The receptions will discuss economic growth prospects in Brazil; development and potential of the digital media sector, including successful mobile and internet-based models; successful models being replicated in the market; and ways to participate in the Brazilian digital media and technology pipeline.
INTRODUCTION TO BRAZIL
Against the backdrop of the recent global downturn, Brazil is emerging as an appealing market for investors. Though its economy, the largest in Latin America, was undoubtedly impacted by the downturn, Marciliano Freitas of Harpia Ventures observes that “Brazil’s GDP only decreased in 4Q08 and 1Q09, so the country experienced just two quarters of recession and year-over-year presented growth.” The Bovespa Index also climbed 82.7% in 2009—the highest of any stock market— amidst rising domestic consumption, political stability, and 5% annual economic growth, yet despite these gains, Brazilian stocks still trade at 12.9x forward earnings, compared with 19.1x in China and 18.4x in India.
This potential for growth, along with low labor costs—the average computer programmer makes $17,270 a year in Brazil versus $72,000 in the US—is attracting foreign entries into the Brazilian tech sector. Companies like Google, Yahoo, Microsoft, Facebook, ESPN, and Discovery have already established a presence in the region, while Infosys, Fatwire, and Razorfish each opened offices in the past year and IBM formed the Sao Paulo IBM Innovation Center in August to stimulate development of Brazilian technology.
Digital media companies, however, are not the only players seizing opportunities in Brazil. ABVCAP estimates that venture and private capital inflows from foreign investors have totaled $22 billion over the past five years, and a survey conducted by Coller Capital in April 2009 shows Brazil ranking as the second most attractive investment destination in the world behind China. Carlyle Group revealed plans in September for a heavy push into Brazil, citing macroeconomic stability and increased openness to private equity, following the inceptions of a $50 million fund by Intel Capital in 2006 and a $170 million fund by a partnership between Draper Fisher Jurvetson and a local firm in 2007.
Claudia Fan Munce, managing director of IBM Venture Capital Group, remarked during IBM’s Innovation Center announcement, “We have been watching Brazil for a while. The time is right.”
To learn more about digital media investment opportunities in Brazil, please RSVP by March 1, 2010 to firstname.lastname@example.org. Information will be sent out to pre-qualified attendees. C-level venture capital and institutional investors are invited to attend; members of the press may also inquire.
Managing Director and Founder
Peachtree Media Advisors, Inc.
Tel: (212) 570-1009
Below is a link to the 2nd Dishy Mix podcast interview with Susan Bratton and me regarding Digital Media M&A.
Look for DM 136 podcast: John Doyle.
It’s always fun to speak with Susan and we decided to make this an annual conversation. Enjoy!