Architect Partners » Ecosystem Thoughts

Venture Capital-Backed M&A Exits

Margaretha Margaretha — Tue, 27 Jul 2010 14:46:45 +0000

Within our sector focus, venture-backed companies comprised half of the 40 M&A transactions whose value was between $25 million – $1 billion in Q2 2010. This was up nicely from the first quarter in terms of the number of transactions and the median size increased to well above $130m. The other good news was that the returns on investment showed good results. Our analysis indicates that the median multiple of invested capital was 7.5x(a). Quite respectable.

A number of VCs had a very good quarter with more than one solid M&A exits within our sector:
Trinity Ventures: Ankeena (Fred Wang & Ajay Chopra) and two-year-old CubeTree (Gus Tai & Jim Taber)
Accel Partners: Omneon (Peter Wagner) and Coremetrics (Arthur Patterson)
Norwest Venture Partners: Omneon (Matthew Howard, Promod Haque) and Jigsaw (Jeff Crowe)
T-ventures: CoreOptics (Dr. Georg Schwegler) and Cinterion Wireless (Stephan Noll)
Austin Ventures: Jigsaw (Jim Casella) and CreditCards.com (Craig Milius, Kenneth DeAngelis, Philip Siegel)
Highland Capital Partners: Coremetrics (Dan Nova) and Turbine (Corey Mulloy, Matthew Nichols, Richard de Silva and Robert Davis)

For additional information on many of these transactions, please click our M&A Alert as indicated below.

(a) Information derived from sourced deemed reliable although Architect Partners cannot be sure fully complete.

M&A Snapshot: Q2 2010

jshieh — Fri, 16 Jul 2010 12:40:14 +0000

The overall M&A market within the rapidly converging internet, mobile and digital media sectors remains active yet completed transactions are still at only moderate levels. Below is our at-a-glance M&A Snapshot for Q2. We’ll continue further assessment and analysis over the coming weeks.

M&A Snapshot: Q2 Transactions

jshieh — Mon, 12 Jul 2010 21:21:56 +0000

Architect Partners tracked 372 M&A transactions which took place in the 2nd quarter of 2010 within the converging internet, mobile and digital media sectors. Of these, 40 had announced transaction value between $25 million and $1 billion. We keep careful tabs on these transactions as many are venture backed and represent an attractive exit for venture investors. Also of note, are transactions where transaction value was not announced but was almost certainly within that same range. Below we summarize this activity for the second quarter of 2010. Over the past quarter, via our M&A Alert, we have published a more in-depth strategic assessment of 20 of these transactions. Those are noted and linked below.

M&A Snapshot: Notable Q2 Acquirers

Margaretha Margaretha — Thu, 08 Jul 2010 14:32:44 +0000

By our count, the number of announced M&A transactions within the internet, mobile and digital media sectors remained consistent with the first quarter of 2010. Activity levels are reasonable although buyers continue to be deliberate and selective. Over the course of the next couple of weeks we will be publishing a number of observations regarding recent M&A activity.

Today’s assessment looks at the moves of the most active and notable acquirers. Several important trends emerged:

1) Google continues to be extraordinarily active, acquiring nine companies within the quarter. As is typical of Google, the majority were young companies acquired for their technology and people, not an already built business. Themes included (i) cloud-based application infrastructure (Episodic, Simplify Media, Global IP Solutions and Agnilux), (ii) mobile (Plink, Labpixies and Bump Technologies), (iii) location-based services (Ruba) and (iv) advertising infrastructure (Invite Media).

2) Yahoo is switching into buy mode, with three acquisition this quarter, after a long period of strategy assessment and divestitures.

3) Private-to-private transactions are in vogue with high profile private buyers such as Twitter, Facebook, Groupon, Tippr, Playdom and Zynga.

4) Several traditional enterprise vendors made important moves this past quarter with HP’s acquisition of Palm being the most notable. Also of major significance was SAP’s announced intent to acquire Sybase and IBM’s acquisition of Coremetrics. These were perhaps the most interesting transactions of the quarter as they signal important strategic decisions by an important new group of acquirers to bolster their capabilities within the converging internet, mobile and digital media sectors.

The following table highlights second quarter activity:

Sonic Solutions Goes Mass Market

jshieh — Tue, 29 Jun 2010 22:40:53 +0000

We recently posted on Sonic Solution’s acquisition of Divx, on Google TV and on the various IETV (Internet-enabled TV, or OTT, over-the top TV) business and deployment models.

In keeping with this theme, last week Sonic announced a major new agreement to digitally distribute movies and TV programming for Sears and Kmart. Following Walmart’s acquisition of Vudu earlier this year, we now have two new mass merchant giants moving into the OTT business via this Sonic agreement. This is significant as Sears and Kmart have more combined storefronts than Walmart. Sonic also already powers the online movie stores for Best Buy and Blockbuster.

How did Sonic get here? The company started by encoding and manufacturing DVDs and Blu-Ray movies. In 2008, they purchased the online movie storefront CinemaNow. CinemaNow, now renamed RoxioNow, is part of the “Hollywood to Home” suite of Sonic products for the creation, distribution and playback of digital content.

Sonic now holds a strong competitive position in the OTT business. Their assets include branded and white-label media storefronts, streaming and download technology and video player applications (many acquired via the Divx transaction) on millions of TVs, DVD and Blu-ray players, mobile phones and other terminal devices.

The Proliferation of IP Video

jshieh — Tue, 22 Jun 2010 20:50:35 +0000

Motricity IPO – The IPO Market Remains Challenged

Eric F. Risley — Mon, 21 Jun 2010 13:53:33 +0000

Motricity priced their initial public offering (IPO) (final prospectus) this past Thursday evening with disappointing results. Motricity provides wireless carriers and large corporate customers a wide variety of white label mobile applications and related services. Applications include mobile storefronts and associated content management, mobile search and mobile marketing. Motricity generally hosts their applications on behalf of their customers and currently manages applications with over 35 million active users per month across multiple carriers and geographies. Motricity is notable in that they were one of the early independent vendors providing applications to wireless carriers and large corporate customers. They have historically competed with Amdocs, Sybase (recently agreed to be acquired by SAP), OpenMarket, Ericsson and a variety of other vendors to a lesser extent.

Motricity has gone through a wide variety of ups and downs since its founding and it’s debatable as to whether an IPO was the optimal path for the company at this time. However, with hundreds of millions invested in Motricity since its founding, liquidity was high on the mind of its investors. The IPO market has generally been challenging over the past few months as we’ve highlighted before, and remains so. Motricity started its two week roadshow with institutional investors with the hope to sell 6.8mm shares at a price between $14.00 – $16.00 per share. The end result was a substantially smaller offering of 5mm shares at $10.00. Predictably with such a weak showing, the newly public shares slipped below the offering price.

AP M&A Snapshot: Q1 2010 Theme: Voice is Just Another Application

Margaretha Margaretha — Sun, 06 Jun 2010 23:01:42 +0000

For sources of the above key developments, please click the following links:

a) In-Stat b)Skype/Nokia c) Truphone d) iPhone/VoIP

M&A Themes: Location Awareness

Margaretha Margaretha — Tue, 25 May 2010 16:33:08 +0000

For sources of the above key developments, please click the following links:

1) Fierce Mobile 2) TCS/NIM 3) Navteq/Acuity Mobile 4) Nokia/Dopplr

ReachLocal & TeleNav IPOs

Margaretha Margaretha — Mon, 24 May 2010 14:00:29 +0000

The past week or so has been an important period to test the public market’s receptiveness to companies within the converging internet, mobile and digital media sectors. ReachLocal debuted last Thursday and TeleNav the previous Thursday. Both suffered from a volatile stock market as they met with institutional investors. The good news is that both were completed, albeit at valuations discounted from their objectives.

As we noted in our previous post, ReachLocal (NASDAQ:RLOC) helps local merchants create online marketing programs. Local marketing and advertising is receiving quite a bit of attention by many major vendors including Google, Yahoo!, Nokia and AOL, among others. The prize being chased is $60.5b in annual spend in the process of transitioning from traditional local marketing methods such as yellowpages, print advertising, radio and direct mail to digital methods such as internet and mobile based search, display ads and message-based marketing programs.

ReachLocal was forced to cut their proposed offer price from $18 per share (mid-point of expected range) to $13 (28% discount). ReachLocal is now the 10^th consecutive IPO which has priced below its hoped for price. In this instance, we believe this result is all about the overall IPO market weakness.

TeleNav Inc. (NASDAQ:TNAV) priced their IPO a bit over a week ago, on Thursday, May 14 2010. They were also forced to cut their IPO price, in their case by 33%. Although the stock initially showed a strong gain in the first day of trading, the price quickly returned to a level close to its IPO price, closing at $8.47 by Thursday, May 20 2010. TeleNav has built an enviable business providing turn-by-turn navigation software to wireless carriers, who then offer the service to their subscribers for a monthly service fee. All was good until Google announced a competitive offering for free, which was closely followed by Nokia.