Mergers & Acquisitions

Mergers & Acquisitions

January 23, 2013

Merger and Acquisition Trends in Information and Financial Technology Revealed

The financial technology and information industry witnessed some important mergers and acquisitions in the last year. Berkery Noyes’ latest report provides insight into the mergers and acquisitions trends of the sector as well as their possible outcome.

In the report, the M&A activities of 2012 were compared to those of 2010 and 2011. The report covered information and technology companies in capital markets, payments, banking, insurance and other related financial services.

According to the report, 302 M&A transactions took place in 2012. In 2011, there were only 282, signifying a straight seven-percent year-over-year increase in the transaction volume. Transaction value jumped from $19.84 billion to $30.23---an impressive 52-percent increase.

The report also revealed the median revenue multiple improved from 2.6x to 2.9x, while the median EBITDA multiple increased from 11.5x to 11.9x.

IntercontinentalExchange’s $10.19 billion acquisition of NYSE Euronext represented the largest 2012 transaction. Several bids for NYSE Euronext were blocked by the regulators in 2011. Among them was a $12.39 billion merger bid from Deutsche Borse Group.

The highest volume of transactions took place in the payments segment, recording a straight 47-percent growth in the M&A activities. Four of the industry's top ten highest value deals happened within the payments segment. These transactions reportedly had a combined value of $5.83 billion and represented 19 percent of the industry's 2012 aggregate deal value.

On the other hand, the capital markets segment recorded the least number of transactions. There was actually nine-percent decrease in the transaction volume relative to 2011.

“There are significant changes occurring in the payments sector, which is drawing heightened attention from both strategic and financial acquirers. This includes the creation of enterprise payments hubs that can lower processing costs, as well as the more extensive use of mobile payments systems,” Managing Director at Berkery Noyes John Guzzo noted in a statement.

“Algo trading software solutions present an opportunity for firms to improve execution quality and achieve higher commissions. There is also a push toward more transparency around high frequency trading to prevent flash crashes and similar incidents. Likewise, with the transformation of the derivatives market by regulations such as the Volcker rule, technology companies in the capital markets sector are still facing some elements of lingering uncertainty" said Peter Ognibene, managing director at Berkery Noyes. "Businesses that are taking steps to adapt to the changing capital markets landscape are well situated to continue generating a healthy level of interest from acquirers.”

Recently, Berkery Noyes released its full year 2012 mergers and acquisitions trend report for the software industry. The report analyzes M&A activity in the software industry during 2012 and compares it with data covering 2010 and 2011. The report found there was a 35-percent M&A increase in the last 12 months involving companies that serve the retailer portion of the software industry.

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Edited by Rachel Ramsey

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