M&A Alert - December 21, 2009
Limelight Networks Agrees to Acquire EyeWonder
Transaction Overview
On December 21, 2009, Limelight Networks (NASDAQ: LLNW) acquired EyeWonder for up to $110mm in cash and stock.
Target Description
EyeWonder provides an interactive online video advertising platform that enable advertising agencies and content publishers to create, deliver, manage, and optimize their interactive digital advertising campaigns. It develops video advertising formats for in-stream interactive digital advertising, video banner, expandable video advertisement and video floating advertisement. Competitors include DoubleClick, Akamai’s Acerno acquisition, PointRoll, BrightCove, thePlatform, and theFeedRoom. Since inception, EyeWonder had received $6.8m in total funding from BIA Digital Partners (Partner: Scott Chappell) and United Investors Group (Partner: Louis Marx). Founded in 1999, EyeWonder was among the first providers of on-line video advertising solutions and is based in Atlanta, Georgia.
Buyer Description
Limelight Networks provides content delivery network (CDN) services enabling media companies, content providers and e-businesses to deliver media-rich content to their customers. Limelight ensures smooth content delivery by managing content traffic and preventing server clogging via its servers and network channels. It offers LimelightDELIVER that provides HTTP/Web distribution of digital media files, such as video, music, games, and software, and LimelightSTREAM, that provides on-demand and/or live streaming for various formats, including Adobe Flash, MP3 audio, QuickTime, RealPlayer, and Windows Media. Limelight also offers a Web-based customer portal that provides management information reports and a download manager that simplifies the downloading process for the end user. Jeff Lunsford, Limelight’s Chairman and CEO, was the key executive sponsor of the transaction. Its clients include Microsoft, MSNBC and Facebook. Key competitors include Akamai, Level3, EdgeCast Networks and CDNetworks. Founded in 2001, Limelight Networks is headquartered in Tempe, Arizona.
Of the $110mm purchase price, Limelight will pay $62mm in cash, with the remaining in 12.7mm of its common stock (valued at $48.64mm upon announcement) and 4.9mm additional common stock paid upon EyeWonder reaching certain financial performance milestone in 2011. Comparable transactions include mobile video focused 3G Factory acquired by IperCast in October 2009, Velocix sale to Alcatel-Lucent for $20mm-$25mm in July 2009, Kiptronic sale to Limelight Networks for $12mm in May 2009, Grid Networks sale to Global Media Services in April 2009 and Panther Express sale to CDNetworks in February 2009 and most notably Acerno’s sale to Akamai for $95mm in October 2008.
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| Minimum Revenue Multiple1 | 3.2x-3.5x |
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| Maximum Revenue Multiple2 | 3.7x-4.0x |
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Note: Revenue is based on EyeWonder’s reported annual revenue of $32mm-$35mm. Source: Limelight Networks Investors Call, 12/21/09.
1) Minimum revenue multiple excludes possible earn out payment.
2) Maximum revenue multiple assumes cash and common stock including earn-out payment are made based on 12/21/2009 stock price.
Strategic Rationale
Limelight Networks is acquiring EyeWonder to bolster its capabilities around the insertion and efficient delivery of on-line video advertising. Limelight also acquired Kiptronic earlier this year (May 2009) as part of Limelight’s strategy to develop a strong presence in video ad delivery, a strong emerging market, as well as seek higher margin services to bolster the highly price competitive core CDN business.
Architect Partners’ Observation
As nicely highlighted by Dan Rayburn at Silicon Valley Insider, this transaction is consistent with the likely continued consolidation within the CDN business. Scale and complementing the simple delivery of content with applications where content delivery is a core element, much like EyeWonder, have a strategic importance and are where vendors must go to compete long-term.