Case Study 



M&A trends: an inside look at the sector 

At this point in the cycle, buyers and sellers alike don’t need another article discussing how hot M&A is in the middle market.  Believe me, they all know. And without the proverbial crystal ball we are not here to predict when the train will stop.

We’d like to briefly highlight some of the key themes that, based on our experience, are contributing to the robustness within the media & technology sector. To frame this perspective, since 2015 Livingstone has closed more than 50 transactions exceeding $3B in aggregate transaction value within information services, IT services, marketing, media, security, healthcare IT, B2B and B2C software, and telecom, among others. 

By: Andrew Bozzelli 

More Buyers Want Tech

From the financial buyer perspective, you not only have new firms forming with technology investment mandates, but existing firms that traditionally may not have focused on tech have been expanding their investment teams and mandates to include technology. Likewise, we are seeing strategic acquirers in non-tech sectors increasingly adding technology companies and/or tech-enabled service capabilities to their acquisition criteria.

In an uber-competitive seller’s market, financial buyers are not looking for the next best thing, but rather paying up for solid businesses with multiple avenues for growth.

Andrew Bozzelli is a Partner in the Chicago Livingstone office.  Andy specializes in M&A and special situations. He has developed a focus on the media & technology and security sectors while leading other transactions across the industrial, consumer, distribution and healthcare sectors. 

Demand for Recurring Revenue

As discussed above, the increase in overall tech buyers has created more competition. While most strategic buyers still place capability at the top of their acquisition criteria and will pay a strategic valuation for the right asset, the competition from a bigger pool of financial buyers with a desire to acquire recurring revenue is creating more exit alternatives for lower middle-market technology companies that no longer need to be that perfect fit for that specific strategic acquirer. Financial buyers view a recurring revenue stream with low customer churn as a stable base to acquire and then help management teams scale their sales organizations and operations.

Does Being On-Trend Matter? 

You know what they are: Blockchain, AI, big data, market disruption, etc. These may make for good press and inspire venture funding, but in middle-market M&A, a company’s core profile ultimately dictates successful exit alternatives – recurring revenue, growth profile, customer profile and churn. In an uber competitive seller’s market, financial buyers are not looking for the next best thing, but rather paying up for solid businesses with multiple avenues for growth.

Through the first half of 2018, the media & technology sector was the 2nd most active in M&A globally according to Mergermarket, with 719 deals total, and we expect the appetite for continued sector M&A activity to be extremely robust. While sellers have more exit alternatives than ever before, navigating the landscape requires a refined approach in order to maximize value, certainty, and speed to close as well as find the right partner for the business to support its growth plan.

10 to Know

Industry trends owners should know

© Copyright 2018

Andrew Bozzelli

Partner | Chicago

Specialties:  M&A, Special SituationsSectors: Media & Technology, Security

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