Market Update

Net Neutrality and Why It Still Matters To M&A. Our December 2017 Market Update.

December 2017

Dear Clients and Friends,

What follows is our December report on m&a values and trends in the dozen+ sectors of the information technology universe that we follow, and sometimes lead.  

It’s been a strong year for information technology companies: revenue and profit are up for most and, as you can see from the report below, so are values. We’ve had a strong year – and it’s not over yet. But instead of recapping of our deals and awards, we are going to use this space to reprise a topic that we covered last May: “Net Neutrality”. It’s a topic that we thought had been resolved months ago.  

On December 14th the FCC is set to vote to end Net Neutrality – and it looks bad. As we said last May, we understand the argument by firms like AT&T, Comcast, and Verizon – who argue that “neutrality” regulations that keep them from blocking, throttling or giving “fast lanes” to some content providers but not others violate their rights – and keep them from making money. They assert that the government has no right to force a book store to promote all books equally – or bar that store from charging for premium placement – and the same approach should apply to them. As we also said in May, where there is true competition, we would agree. But most ISPs are not like book stores – they are regional monopolies with the ability to make or break a content provider – and to favor their own content above that of others (and many of them do own content.) 

Amazon, Disney, Facebook, Google, and/or Netflix are upstarts that made it big in this country in part because of unfettered access to customers. Now that they are big, they may be able to pay to get their content to customers fast.  But how will that impact firms like Etsy and Pinterest or a hundred other new upstarts?  We advise many of those firms – and we know that their value is inexorably tied to their expected future. Ending Net Neutrality will not only add to their challenges, it may kill them. Along the way it will reduce innovation, depress demand, and reduce values for affected companies. 

We only have until December 14th until the FCC votes. So if you agree, write or call your lawmakers by clicking here. Tell them that the revolution in information technology is just beginning. Don’t kill it. Long live Net Neutrality.

Some of the more interesting deals this past month are profiled on the pages that follow in the report found below. A few of them include:

  • Thoma Bravo agreed to acquire Barracuda Networks (NYSE:CUDA) for $1.6bn, valuing the company at an implied 3.6x LTM revenue and 38.6x LTM EBITDA,
  • Verisk Analytics (NASDAQ:VRSK) agreed to acquire Power Advocate for $280mm,
  • TransferWise (London, United Kingdom) raised $280mm in a series E funding round,
  • Radius Payment Solutions (Crewe, United Kingdom) raised £150mm (~$200mm) in an equity funding round led by new investor Inflexion Private Equity Partners,
  • Euronext (ENXTPA:ENX) acquired the Irish Stock Exchange for €137mm (~$162mm), valuing the company at an implied 4.7x LTM revenue and 14.3x LTM EBITDA,
  • Uptake Technologies (Chicago, IL) raised $117mm in a Series D funding round led by Baillie Gifford, valuing the company at a post-money of $2.3bn.

Please see our December Market Update below.

We wish you and your families happy, healthy holidays and look forward to working with you in the New Year.

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