Tag: Warburg Pincus

Making money with coupons

Ben Kolada

Contact: Ben Kolada

Online coupon directory vendor RetailMeNot, formerly known as WhaleShark Media, filed its IPO paperwork on Monday. A total of seven investment banks crowded onto the offering, which could initially value the company in the ballpark of $800m. Meanwhile, a recent high-priced buyout and a couple of more coupon deals that we hear are in the pipeline could make 2013 a breakout year for the online couponing industry.

RetailMeNot has grown dramatically since its incorporation as smallponds in 2007. Through organic and inorganic growth, RetailMeNot increased total revenue 80% to $145m last year. The company primarily did business as WhaleShark Media throughout its lifetime, but rebranded as RetailMeNot this year, taking the name of a startup it acquired in 2010 and whose websites now account for the majority of its traffic.

No fewer than seven investment banks have piled onto the offering, with Morgan Stanley taking the lead left spot. RetailMeNot plans to trade on the Nasdaq under the symbol SALE.

The midpoint valuation of recent comparable transactions suggests that the company could debut at about $800m, or roughly 5x its trailing sales ($155m as of March 31). RetailMeNot was valued at 5.6x trailing sales in its $159m sale to WhaleShark Media in 2010. More recently, we estimate that Slickdeals was valued at 4.6x sales in its quiet sale to Warburg Pincus at the turn of this year.

At least two other coupon companies will be closely watching RetailMeNot’s debut. We’ve heard that CouponMom and dealnews have also been in the market recently.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Increasing interest in Internet M&A, as Getty Images sells for $3.3bn

Ben Kolada

Contact: Ben Kolada

In another sign of growing interest in the digital media sector, and in Internet companies in particular, Getty Images has announced that its management and The Carlyle Group are acquiring the company from Hellman & Friedman for $3.3bn. The consortium is paying nearly 40% more for the company than H&F did just four years ago when it took Getty private in a $2.4bn deal. The deal is the largest Internet content and commerce acquisition since Silver Lake Partners and Warburg Pincus announced in May 2010 that they were taking Interactive Data Corp private for $3.4bn.

With the exception of a dip in 2003, M&A volume in the broad Internet content and commerce category has risen every year since we began tracking tech acquisitions in 2002. Unlike the greater tech sector, Internet deal volume was even resilient during the recent recession. According to The 451 M&A KnowledgeBase, while overall yearly tech M&A volume dropped 25% from its high of 4,032 transactions announced in 2006 to 3,020 in 2008, Internet M&A volume rose 10.5% over the same period.

Both older Internet properties and hot upstarts are attracting interest. The advent of social media has enabled today’s Internet startups to rapidly market their products to millions of consumers through powerful word of mouth marketing. Meanwhile, older Internet vendors that survived the tech industry’s nuclear winter a decade ago have now matured, and many are seeking liquidity.

Also driving M&A activity is the rise of serial Internet acquirers such as Google, which has picked up 31 Internet firms. And we’re seeing a resurgence of Internet consolidation shops, such as Rebellion Media and MITRE.

Internet content and commerce annual deal volume

Year Deal volume % change
2012 YTD 441 N/A
2011 787 26%
2010 625 9%
2009 572 13%
2008 504 4%
2007 485 6%
2006 456 53%
2005 298 62%
2004 184 8%
2003 170 -36%
2002 265 N/A

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

A little leads to a lot as Citi buys Ness

Brenon Daly

Contact: Brenon Daly

More than three years after buying a small stake in Ness Technologies from a fellow buyout shop, Citi Venture Capital International (CVCI) has offered some $307m in cash for all of the IT services vendor. The private equity arm of Citigroup initially picked up a 9.6% stake in Ness in early 2008 from Warburg Pincus, which funded the Israeli firm in 1999. Ness put some of that money to work in M&A, acquiring a dozen (mostly small) companies over the past decade.

Ness had been out of the market for the past year, however, as it was put in play by an unsolicited bid. (Jefferies & Company advised Ness on the sales process, along with the company’s longtime adviser Bank of America Merrill Lynch. Merrill was co-underwriter on Ness’ 2004 IPO.) We understand that Ness had attracted a fair amount of interest over two rounds of bidding, including a look from Vector Capital. CVCI’s offer of $7.75 per share represents the highest price for Ness stock since October 2008. (Interestingly, terms include a ‘no shop’ provision and a breakup fee of $8.35m, or a standard 2.7% of deal value.) CVCI expects to close the transaction within a half-year.

Preferred gets preference

Brenon Daly

Even with McAfee’s offer of $5.75 in cash for each share of Secure Computing representing a premium of about 27% over the previous close, many Secure shareholders are underwater. In June, Secure sank to its lowest level in six years, part of a slide that has seen some 40% of its market value erased this year. The decline left the company trading at just 1x revenue. (When it shed its authentication business at the end of July, we noted that the divested unit sold for twice the valuation of the remaining Secure business, a highly unusual situation in corporate castoffs. We also asked if the move wasn’t a prelude to an outright sale of the company.)

It turns out, however, that the stock’s decline didn’t really affect Secure’s largest shareholder, Warburg Pincus. The private equity firm took a $70m stake in Secure in January 2006. (Secure took the money to help it pay for its mid-2005 purchase of CyberGuard.) Yet, because of the way Warburg structured its purchase, the shop ended up making money on its holding. That’s true even though Secure stock, even with McAfee’s offer, is some 60% below where it was when Warburg took its stake. (Shares changed hands at $14.40 each when Warburg picked up its holding, although the conversion price was adjusted slightly six months later to offset the potential dilution caused by Secure’s cash-and-stock purchase of CipherTrust.)

In the end, Warburg pocketed $84m from McAfee for its Secure holdings, which were largely made up of series A preferred shares. Having put $70m into Secure, and then seen the shares sink, we guess Warburg is probably content to book even a slight gain on its investment.

Red-zone M&A

So-called ‘New Europe’ is emerging as an important Web 2.0 market. Revenue growth is steady in the mid- to high-double digits compared to low-double digits for the established US web portals. That hasn’t gone unnoticed by global companies scrambling to tap into these faster-growing markets. The latest example is the rumored sale of leading Czech Republic search engine and web portal Seznam. Goldman Sachs has reportedly been tapped to head the sale. Google, Microsoft and private equity shop Warburg Pincus are said to all be serious contenders, according to the Czech media.

Seznam is closely held. Founder Ivo Lukacovic owns just over two-thirds of the company, with the rest held by investment firms Tiger Holding Four and Miura International. The 450-employee portal says it took in about $55m last year, up from about $30m the year before. Revenue is expected to reach $80m for the year. Seznam is reportedly being shopped around at a valuation of $900m. At a multiple of 11 times sales, that is a premium compared to a similar deal inked by Warburg Pincus last year. The buyout firm acquired Seznam competitor NetCentrum for $150m at a multiple of 6.5 times revenue. Nonetheless, compared to recent US Web 2.0 deals, the rumored valuation of Seznam is in line with, or at a discount to, market prices.

If a deal for Seznam gets done, the purchase will stand as one of the largest Internet deals ever inked in the former Soviet block. And as the Eastern European Internet market continues to grow, we believe so will the M&A activity from anxious companies trying to make an early land grab. Meanwhile, other search engines may look to go it alone. Yandex, a leading Russian portal, has reportedly been preparing for a US public offering for some time now, but an almost nonexistent IPO market may lead it to consider a sale, instead. We’re fairly certain that Google and Microsoft stand ready to provide the liquidity for either (or both) of these companies if the public markets can not.

Recent transatlantic search M&A

Date Acquirer Target Deal value TTM Revenues
July 18, 2008 Google ZAO Begun (Russia) $140m Not disclosed
May 26, 2008 Google 265.com (China) Not disclosed Not disclosed
January 8, 2008 Microsoft Fast Search & Transfer (Norway) $1.24bn $167.75m
December 4, 2007 Warburg Pincus NetCentrum (Czech Republic) $155m (reported) $24m (reported)

Source: The 451 M&A KnowledgeBase