"Dunn's results in guiding the sale of our family business were outstanding in every dimension, from the sale price, the methodology of the sale process and his thoughtful guidance on what may happen post sale. Working with someone who, as they saying goes, has "seen the movie" created a real sense of comfort and instilled confidence that our family's business gem was in trusted hands."
"I've known the principals of Dunn Rush & Co. for a number of years and have had the opportunity to work with them in many different capacities. They're true professionals, with deep experience in a wide range of transactions, across several industries. They are good people, and I have always enjoyed working with them. You can trust them to provide top-quality advice no matter what your situation or circumstances."
Technology, Communications & Media
- Equipment
- Hardware
- Services
- Software
- Internet and Digital Media
- Traditional Media and Marketing Services
The Technology, Communications & Media sectors have maintained momentum better in some sub-sectors than others through recent challenging times in the market. Generally, areas of high growth and efficiency-oriented new technology have continued to draw interest from both strategic and financial buyers, although like other industries there has been recent downward pressure on valuations. Sub-sectors such as equipment and hardware have faced greater challenges, driven by customers’ slowing or delayed demand for capital investment.
Trends we are seeing in this sector include:
- Some potential buyers have been constrained by an emphasis on cash conservation.
- Large technology companies with cash on their balance sheets are looking to acquire solid growth technology and IP.
- Earlier-stage technology companies that need to raise follow-on rounds of financing may face difficult valuation considerations.
- Buyers looking for tuck-in acquisitions that can expand product offerings to their customers or bring new customers to their platform.
- Media activity has been driven by conflicting pressures: solid growth and appetite for electronic and new media has been overshadowed by the difficulties of traditional media companies caused by the combination of high existing levels of leverage and rapidly changing dynamics in the advertising market and consumer consumption patterns.
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Many sub-sectors driven by increasing technology standards, where growth due to longer-term trends will be valuable despite short-term financial impact.
The number of transactions in the Technology, Communications & Media sector slipped consistently through 2008 and 2009. Volume in the sector has trended upward during 2010 and into 2011. Like all sectors, valuations declined rather sharply during 2008 and 2009 due to the turmoil in the capital markets and softness in the economy. Raising capital continues to be very challenging and expensive for earlier-stage companies, although money available for technology investments and acquisitions are typically less reliant on the debt markets. However, we have seen improving trends for several quarters in both deal volume and valuation heading into 2012.
In terms of valuations, quarterly average enterprise value / revenue multiples have ranged from 1.2x to 2.1x since the beginning of 2008, with the average revenue multiple in the sector for Q4 2011 hitting that peak at 2.1x. Average enterprise value / EBITDA (earnings before interest, taxes, depreciation and amortization) multiples for this same period ranged from 6.9x to 10.1x, and the average EBITDA multiple in the sector for the most recent quarter was 9.2x.
We expect the software, services and digital media sectors to continue rebounding more quickly than the hardware and traditional media markets as the economy continues to recover very slowly from recent difficulties. But in general this industry saw improving trends in 2011 over 2010 and 2009, and this positive momentum should carry forward into 2012.