RSS feedsThe information industry looks set to continue its merger and acquisition (M &A) activity in 2010. But with recession clouds lingering over the economy corporate ambitions could still be thwarted by wary shareholders and bankers without the cash to back the proposed deals.
This was certainly the case for publisher Informa and German academic publisher Springer. At the end of 2009 Informa turned its back on the purchase of Springer Science + Business Media because, according to Reuters, it felt it couldn’t do a deal in the time required by the debt-laden firm’s private equity owners.
Informa’s share price rose 10% on the announcement of its pull out. And it left the way clear for EQT, the private equity arm of Sweden’s Wallenberg family, to snap up Springer in the biggest private equity deal for more than a year.
The information industry may struggle to match the Kraft Foods Company’s £11.5bn takeover of Cadbury in January, but the M&A scene within the information sector has been buoyant and busy in the last few months.
Early in 2009, we saw UK software firm Autonomy acquire content management systems developer Interwoven for $775m (£561.5m). Autonomy expected to generate annual costs synergies of approximately $40m (£28.9m) during the 12 months following the deal completion (Q2 of 2009) from the elimination of duplicate costs. Last month it told the market its figures were in line with those expectations.
This was followed in April by enterprise content management company Objective’s £3.18m acquisition of Limehouse Software, the developer of unified software solutions. With this move, Objective aimed to accelerate its growth within the public sector market.
And five months later, in August, Objective’s European revenue grew 50% to $9.4m (£5.7m) despite tough market conditions, because the deal brought with it over 200 extra UK local government clients.
Meanwhile, according to data on merger deals from Thomson Reuters, the global mergers and acquisitions finished the year at $1.97tr (£1.23tr), down 32% from the 2008 total ($2.89tr) and down 53% from the record high reached in 2007 ($4.17tr).
Rising Challenges
However, even as economic challenges soared in 2009, information providers considered merger deals to diversify, enhance product offerings, synergise, improve market share, boost product portfolios and to become a one-stop-shop for cash-strapped customers looking for discounted bundled deals.
The momentum only accelerated in the last quarter of 2009 with significant developments involving major information providers. In November, Informa had a keen interest in acquiring ailing Springer, only to end talks in December after failing to agree on a price. Only a week later Springer was sold to EQT Partners and Government of Singapore Investment for E2.3bn (£2.1bn).
The Springer-EQT/GSI deal is expected to close by end of this month. The agreement has left Springer owners Candover Investments and Cinven to share just about E100m from the sale proceedings. This is because Springer’s existing debt pile amounted to a whopping E2.2bn.
After the completion of the deal, Springer will be owned 82% by EQT while the remaining 18% will be held by the Singaporean co-investor. Then Candover and Cinven will leave the business they formed in 2003 through the merger of the former’s BertelsmannSpringer with latter’s Kluwer Academic Publishing. Springer had initially planned to raise up to €500m by selling 49% of the company, but as offers failed to meet its valuations, it decided to sell the whole business.
While the Springer deal is formally being completed, another global intelligent information provider for businesses and professionals, Thomson Reuters, is progressing in its acquisition of Discovery Logic, a provider of customisable analytics and decision support solutions for scientific research.
In the first week of the new year, the company announced that Discovery Logic had become part of its healthcare and science business, with immediate effect. Financial terms of the transaction were not disclosed. Discovery Logic provides systems, data and analytics for real-time portfolio management, decision support, outcomes tracking and information visualisation.
Both information providers specialise in transforming information into knowledge. Together they can create a resource to help global professionals make crucial decisions on projects, people and research collaboration opportunities.
According to Thomson Reuters, the acquisition will enhance existing research analytics offerings and boost decision support and workflow solutions to academic, government, non-profit and commercial professionals.
To its healthcare and science’s scientific and scholarly research group, Discovery Logic brings assets such as ScienceWire – its highly customisable and proprietary software and database platform; plus complementary capabilities in analytics, data management and value-added services; and scientific-oriented skilled professionals.
“Combining Discovery Logic software, analytics and data mining capabilities with our global resources will result in extraordinary workflow solutions and services to help our customers improve their outcomes,” said Mike Boswood, president and chief executive of the healthcare and science business, Thomson Reuters.
“There is an increasing global need for analytics on grants, experts and research outcomes,” added Keith MacGregor, its executive vice president. “Combining content, tools and services from Thomson Reuters with data analytics from Discovery Logic will enable our business to deliver a one-of-a-kind solution for evaluation and outcomes measurement.”
Changing plans
The information segment players’ confidence in consolidation through acquisitions increased after it saw how plans by Anglo-Dutch publishing group Reed Elsevier to raise funds and reduce debts led its shares to close down 13% in a single day.
Last year, Reed Elsevier intended to sell RBI for £1.3bn, but recession forced it to drop the price to £650m. It then scrapped the sale altogether and began a rights issue. However, last month [January] it was reported that the publisher is in talks to sell of its controlled circulation magazines and re-organise its RBI division in the US.
The trend for acquisitions is continuing in 2010 with ProQuest, the provider of specialist information resources, announcing in January that it had acquired International Bibliography of the Social Sciences (IBSS) from the London School of Economics, to “secure the future of the world’s premier social science database”.
At the same time, Pearsons, the publishing and education group that owns the Financial Times, is considering selling IDC (Interactive Data Corporation), its financial data arm. It is still reviewing the future of its $1.5bn (£920m) stake in the financial information group.
Many expect M&A generally to revive in 2010 and players in the information sector may well play their part because M&As provide them with the much needed consolidation and larger market share – vital in uncertain economic times.
Fewer deals in 2009
Last month, global information services company Experian’s report on mergers and acquisitions and equity capital market (ECM - flotation, rights issue and placement) showed a 24.5% decrease in UK M&A and ECM transactions announced in 2009. Covering Q4 and year-end 2009 in the UK market, it recorded 4,269 deals compared to 5,656 in 2008. Overall, the deal volumes in the UK and Europe continued to decline with some encouraging signs in the last quarter of 2009, according to the report.
