Our report covers a very exciting period in Digital Marketing spanning from January 2012 through June 2014. We’ve broken down the period into five half-year periods in order to provide meaningful insights into the recent trends rocking this sector. With valuations currently standing at 4.4x median EV/S ratio and 12.6x median EV/EBITDA. Digital Marketing proves to be one of the most active and exciting sectors of the technology industry M&A. Within the last two and a half years alone we have seen prolific acquirers spend in excess of $1billion – see our report for the list of 10 leading buyers in the sector. The report includes:Screenshot (68) Trends and analysis of deal activity Geographical split of sector transactions globally Valuations medians Metrics by sub-sector Discussion of transaction implications Top 10 sector buyers Hampleton’s Digital Marketing report provides thorough analysis into geographical and transactional trends in the space, as well as the key macro-drivers that are imposing such activity.

1. Information Management Report
September 2014
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M&A Overview September 2014
Digital Marketing

2. Digital Marketing Report
September 2014
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Hampleton’s Digital Marketing report covers the two and a half year period between January 2012 and June 2014. All totals and median values refer to the entire period unless otherwise stated. Median multiples plotted in the graphs are for the 30 month period prior to and including the half year.
The volume of the M&A market in digital marketing grew in 1H 2014. There were 194 acquisitions of digital marketing targets in the past half year, which amounts to a 42% increase on 1H 2013. While the volume increased, the trailing 30 month median revenue and EBITDA multiples declined to 3.5x and 12.6x respectively.
The aggregate disclosed value of transactions in the sector was $1.5 billion in 2014. This is lower than usual and due to a lack of bigger- ticket transactions.
A market characterised by a greater volume of smaller deals is an ideal scenario for smaller companies looking to exit. Acquirers are less likely to be distracted by the pursuit of large targets and are more likely to pursue several smaller acquisitions simultaneously.
Notable transactions in 1H 2014 include Chicago-based private equity firm GTCR’s acquisition of Vocus, a global provider of cloud-based public relations and marketing software, for $447 million, or 2.2x revenue. The transaction was announced in April and completed in May, and the price tag was the highest for a digital marketing target in 1H 2014.
In January, Brightcove, a US provider of cloud services for video, acquired Unicorn Media, a developer of advertising enablement SaaS, for $49 million, an amount equivalent to 9.8x revenue. Unicorn’s signature product, Once, is a SaaS solution that allows for customisable advertising to viewers of on- line video, and which is used by top US networks like ESPN, NBC News and The Weather Channel. Unicorn held 14 U.S. patents, seven of which are also recognised internationally, in addition to 20 patents pending. This impressive customer base and strong IP portfolio explains Unicorn’s high valuation in terms of revenue.
$1.5 B
Total transaction value in 1H 2014
3.5x
Median EV/S
12.6x
Median EV/EBITDA
4.4x
4.4x
4.4x
3.9x
3.5x
-7.0x
-5.0x
-3.0x
-1.0x
1.0x
3.0x
5.0x
1H 2012
2H 2012
1H 2013
2H 2013
1H 2014
0
50
100
150
200
250
Total Transaction Count
Trailing 30 Month Median EV/S

3. Digital Marketing Report
September 2014
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The majority of digital marketing targets are headquartered in North America, while 19% are based in Europe and 15% are headquartered elsewhere. 61% of European targets were purchased by European firms and 36% were acquired in transatlantic transactions. Only 3% of European targets were acquired by firms based outside of Europe or North America.
European digital marketing targets tend to be small firms focused on specific sectors or with unique creative or technical capabilities. Large acquirers are pursuing these companies as part of strategy for either identifying and hiring top creative talent or acquiring proven solutions for facilitating digital marketing.
1H 2014 saw several notable acquisitions of European companies. In June, global PR giant Edelman purchased Deportivo, a 20-employee Swedish creative agency which builds apps and online experiences as part of a unique approach to digital marketing, for an undisclosed amount. According to AdAge, Edelman COO Matt Harrington saw significant value in the creative vision of Deportivo’s approximately 20 employees, signalling a shift in strategy toward acqui-hires as a mechanism for retaining top creative and technical talent.
In March, St. Ives, a UK holding company and prolific acquirer in this space, purchased Realise Holdings, a digital marketing agency with offices in London and Edinburgh. St. Ives paid $36 million, the most for a European target in 1H 2014. The purchase price reflects an EBITDA multiple of 8.3x. Realise has a particular strength in financial services, with clients including AXA, Lloyds Banking Group and Standard Life Investments.
42%
Year-on-year increase in transaction volume
$19 M
Median transaction value in 1H 2014
12.6x
Price St. Ives paid for Realise Holdings, the highest price for a European target in 1H 2014.
Target Headquarters
Headquarters of Acquirers Purchasing European Targets
61%
36%
3%
19%
66%
15%
Europe
North America
North America
Rest of World
Rest of World

4. Digital Marketing Report
September 2014
3 |
We placed 50% of targets into the category Digital Agencies and Marketing Services Providers. 33% were classified as Marketing Application Software providers, and 17% fell into the category of Web Design and Development firms.
Digital Agencies & Marketing Services Providers: Online advertising, mobile & web marketing, e-mail marketing and measurement.
Marketing Application Software: Online marketing & e-commerce software, CRM, advertising enablement.
Web Design and Development: App lifecycle management, web development, web design.
Acquisitions of digital agencies and marketing service providers increased by 39% year-on-year. The trailing 30 month median revenue multiple decreased to 1.4x, while the EBITDA multiple over the same period was 8.9x, also down slightly from previous half-years.
The median disclosed transaction value for the sub- sector was $18 million.
In June 2014, Amobee, a subsidiary of Singapore Telecommunications and a provider of marketing software, acquired Adconion, a digital advertising agency headquartered in the US. The purchase price was $209 million, the largest for a target in this sub- sector in 1H 2014. Amobee paid 1.3x revenue for Adconion, which also has offices in Australia.
Jaywing, a publicly-traded UK digital marketing agency, acquired Epiphany Solutions, a London-based provider of SEO services and solutions, for $20 million or 8.9x EBITDA.
Within this subsector, digital agencies tend to command slightly higher revenue multiples than marketing service providers. For an in-depth look at the M&A market for digital agencies, please see our recently published Market Spotlight on Digital Agencies.
50%
33%
17%
Digital Agencies and MarketingServices Providers
Marketing Application Software
Web Design and Development
2.8x
3.4x
2.0x
2.0x
1.4x
-7.0x
-5.0x
-3.0x
-1.0x
1.0x
3.0x
5.0x
1H2012
2H2012
1H2013
2H2013
1H2014
0
20
40
60
80
100
120
140
Transaction Count
Trailing 30 Month Median EV/S
Digital Agencies & Marketing Service Providers
Sub-sector Overview
8.9x
Median EV/EBITDA
1.4x Median EV/S

5. Digital Marketing Report
September 2014
4 |
M&A activity in marketing application software reached a historic volume in 1H 2014. The transaction count of 76 was the highest in over ten years. The trailing 30-month median revenue multiple climbed to 6.5x and the EBITDA multiple over the same period of time was 16.4x. However, aggregate deal value dropped to $900 million, the lowest in the sub-sector since 2H 2011. This is due to the lack of large transactions in this space, which we haven’t seen since Salesforce purchased EventTarget for $2.5 billion in June 2013.
Unlike marketing agencies and web designers, which derive their value mainly from the talent and expertise of their employees, marketing software developers also hold intellectual property rights over their solutions. This explains why valuations in this sub- sector are considerably higher in terms of revenue than valuations in other subsectors and in digital marketing as a whole.
In June 2014, US property management software provider RealPage paid $32 million for Kigo, a Barcelona-based provider of SaaS and services for marketing vacation homes. RealPage intends to hire all of Kigo’s 80 employees, 50 of whom work in sales.
Valuations for web design and development targets held steady in 1H 2014. The trailing thirty-month media multiple was 2.0x for the fourth consecutive half-year and the EBITDA multiple over the same period was 12.6x. The median disclosed transaction value for 1H 2014 was $12 million.
In June, mophie, North America’s leading manufacturer of mobile device battery cases, acquired California-based web design and software development firm Submodal for an undisclosed amount. Also in June, PwC New Zealand purchased Optimal Experience, a web design consultancy with offices in Wellington and Auckland, for an undisclosed amount.
Both of these transactions demonstrate that the “buyer universe” for web design firms spreads well beyond marketing agencies and internet companies. Therefore, web designers looking to exit would be well served to consider outside-of-the-box possibilities during a buyer research process
2.4x
3.6x
2.4x
2.2x
2.3x
-7.0x
-5.0x
-3.0x
-1.0x
1.0x
3.0x
1H2012
2H2012
1H2013
2H2013
1H2014
0
10
20
30
40
50
60
Total Transaction Count
Trailing 30 Month Median EV/S Ratio
5.0x
5.2x
5.9x
5.9x
6.5x
-7.0x
-5.0x
-3.0x
-1.0x
1.0x
3.0x
5.0x
7.0x
1H2012
2H2012
1H2013
2H2013
1H2014
0
10
20
30
40
50
60
70
80
90
100
Total Transaction Count
Trailing 30 Month Median EV/S
Marketing Application Software
Web Design & Development
16.4x
Median EV/EBITDA
6.5x Median EV/S
2.0x Median EV/S
12.6x Median EV/EBITDA

6. Digital Marketing Report
September 2014
5 |
Publicis Groupe was the top acquirer in this space with 22 transactions since January 2012
Acquirer Acquisitions Amount
Hawkeye: Digital marketing services.
Lighthouse Digital: South African digital marketing.
Applied Media Logic: South African digital marketing.
*3 most recent of 22 transactions since 1H 2012.
+500 million
Quirk Digital Marketing: South African digital marketing.
Twist Image: Canadian digital marketing.
Cognified: UK digital marketing.
*3 most recent of 13 transactions since 1H 2012.
+540 million
nvi: Web marketing services provider.
Beijing Wonder Advertising: Web marketing services provider.
Lucidity Digital: Web design and marketing services.
*3 most recent of 7 transactions since 1H 2012.
+$125 million
mDialog: Video stream advertising SaaS.
Appetas: Restaurant web design SaaS.
Autofuss: Web and video marketing services.
*3 most recent of 7 transactions since 1H 2012.
+500 million
Responsys: E-mail marketing software provider.
Big Machines: CPQ sales automation SaaS.
Eloqua: Marketing automation SaaS provider.
*3 most recent of 5 transactions since 1H 2012.
+$3 billion
explido: German digital marketing services.
Traffic: Russian digital marketing agency.
TRIO Digital Integrated: Chinese digital marketing agency
*3 most recent of 4 transactions since 1H 2012.
Undisclosed
Pryte: Mobile application distribution SaaS.
Hot Studio: Web design employees.
Microsoft: Atlas advertiser suite assets.
*3 most recent of 4 transactions since 1H 2012.
Undisclosed
Aerodeon: Turkish digital marketing services.
plista: German online advertising network.
ClickMedia: Asian social marketing services.
*3 most recent of 4 transactions since 1H 2012.
Undisclosed
X-Prime Groupe: French digital marketing services.
Post Visual: Korean digital marketing agency.
ActiveArk: Web design services provider.
*3 most recent of 4 transactions since 1H 2012.
Undisclosed
Team Internet: German SEO and domain resale.
Adquant: Facebook advertising placement software.
MobAff: Mobile affiliate marketing services.
*3 most recent of 4 transactions since 1H 2012.
Undisclosed

7. Digital Marketing Report
September 2014
6 |
Hampleton provides independent M&A and corporate finance advice to owners of Internet, IT Services and Software companies. Our research reports aim to provide our clients with current analysis of the transactions, trends and valuations within our focus areas.
Data Source: We have based our findings on data provided by industry recognised sources. Data and information for this publication was collated from the 451 Research database (www.451research.com), a division of The 451 Group. For more information on this or anything else related to our research, please email the address provided below.
Disclaimer: This publication contains general information only and Hampleton Ltd, is not, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. Hampleton Ltd shall not be responsible for any loss whatsoever sustained by any person who relies on this publication.
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