Archive for the ‘Broadcast Vendor M&A’ Category

Grass Valley Paid $94.2M for Snell Advanced Media

Analysis, Annual Results, Broadcast Vendor M&A, Conference Sessions, SEC Filings | Posted by Joe Zaller
Feb 13 2018

Last week, Belden / Grass Valley announced it had closed the acquisition of Snell Advanced Media (SAM).

At that time, the company did not disclose the terms of the deal.

Today, Belden said in a filing with securities regulators that it paid $75.8 million plus the assumption of $18.4 million of debt for a company it acquired on February 8, 2018 (the same day it confirmed the SAM acquisition).

This equates to an enterprise value of $94.2 million.

Based on filings with the UK government, SAM’s parent company had revenue of £90.8 million ($123 million USD at 2016 average exchange rate) through December 31, 201, and increase of 20.3% from £75.4 million ($115.2 million USD at 2015 average exchange rate) for the 12 months ending December 31, 2015.

Based on its previous acquisitions in the broadcast industry, Belden typically pays around 8x EBITDA when it buys a company.  If that was the case in the SAM transaction, it would mean that SAM’s EBITDA over the trailing twelve months prior to the acquisition was $11.775 million. However, in its filing with UK regulators, SAM said it had EBITDA of -£1.6 million for the 12 months ending on December 31, 2016.  Performance for the full year 2017 is unknown.

Given SAM’s growth from 2015 to 2016, the company may have achieved positive EBITDA, but the full details won’t be known until Belden provides additional information about the transaction (which it said it will do closer to the 2018 NAB Show).  It’s also possible that the valuation was based on a multiple of SAM’s sales in 2017.

 

Attend the 2018 Devoncroft Executive Summit to hear more about Belden’s strategy

For those wondering about Belden’s plans for SAM, and whether it continues to look for M&A targets in the broadcast industry, join us on April 8, 2018 to find out.

That’s the date of the seventh annual “Devoncroft Executive Summit: The Business of Media Technology,” where Belden CEO John Stroup will be take part in a panel of broadcast technology supplier CEOs.

Registration for the 2018 Executive Summit is available here.

 

The relevant text from Belden’s filing has been pasted in below:

Note 28: Subsequent Events

On February 8, 2018, we acquired a company for a purchase price of $75.8 million, plus we assumed debt of $18.4 million. The acquisition includes a potential earn-out for which we have not yet estimated a fair value. This acquisition was funded with cash on hand.

We are in the preliminary phase of the purchase accounting process, including obtaining third party valuations of certain tangible and intangible assets acquired. As such, the purchase accounting process is incomplete and we cannot provide the required disclosures of the estimated fair value of the assets and liabilities acquired for this business combination.

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Related Content:

2018 Devoncroft Executive Summit: The Business of Media Technology

Belden/Grass Valley Acquires Snell Advanced Media

Grass Valley Q4 2017 Revenue Impacted by Revenue Recognition, Predicts Growth for 2018

Broadcast Vendor M&A: Belden Completes Acquisition of Grass Valley, Will Invest $25 Million in Integration of Combined Business

More Broadcast Vendor M&A: Belden Buys Miranda for $350 Million in All-Cash Deal

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© Devoncroft Partners 2009-2018.  All Rights Reserved.

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Belden/Grass Valley Acquires Snell Advanced Media

Analysis, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results, Conference Sessions | Posted by Joe Zaller
Feb 08 2018

Belden announced it has closed the acquisition of Snell Advanced Media (S-A-M).

Terms of the deal were not disclosed.

The deal makes Grass Valley one of the largest media technology suppliers.

Clearly the company believes there is growth to be had in broadcast.  At the company’s December 2017 investor day, Belden CEO John Stroup said “I think that we have a lot more conviction around what’s happening in the broadcast industry than we did two years ago. And as you recall – or you may recall, our concentration within production, in particular around live, gives us a lot more confidence that we’re going to see growth in that end market than we did, say, in the last two to three years.”

Although at first glance there is substantial product overlap between Grass Valley and S-A-M, there are less similarities between each company’s geographic sales footprint, which will help Grass Valley expand into new customers. A Grass Valley spokesperson said that the deal would help the company extend its reach and provide in-region support to its global customer base.

Additionally, a number of each company’s respective product lines are complementary (in news for example), making the overall Grass Valley proposition more robust.

According to Belden management, S-A-M will be integrated into Grass Valley, and moving forward the S-A-M brand name will be retired, and “Grass Valley, a Belden Brand” will be used as the company name.

Tim Shoulders will be the president of the combined company, which will be headquartered in Montreal.

Belden executives cited multiple strategic reasons for the deal, including gaining market share, and an expanded geographic footprint.

“With this investment Belden again demonstrates our commitment to the broadcast industry. Adding SAM’s employees and products to the Grass Valley family extends Grass Valley’s global reach, makes us more agile and provides even more domain expertise to enhance Grass Valley’s industry-leading solutions in networking, news and live production and content delivery for broadcasters,” said Shoulders. Our customers face competition and uncertainty like never before. This transaction will help them navigate the technology options available to them with fewer concerns around interoperability and deployment complexity while providing them greater access to the innovators developing the solutions of tomorrow.”

Prior to doing this deal, Belden did substantial work to refinance its debt, which provided additional financial leverage for M&A.  Indeed, the company’s CFO often refers to the amount of “dry powder” that the company has available for M&A. At the company’s investor day, Stroup said “We [are] extremely pleased with the execution of our debt refinancing and repayment during the quarter. By issuing €450 million of senior subordinated notes at 3.375% and €300 million at 2.875%, the lowest long-term borrowing rates in the history of the company, we have further lowered our cost of capital and extended our maturities. In total, we expect these actions to be accretive to EPS by $0.47 on a full-year basis.

 

Reminiscent of Previous Industry Roll-ups

The S-A-M deal is Belden’s fifth acquisition in the media and broadcast technology sector.

 

In addition to these transactions, Belden acquired KVM switch vendor Thinklogical in May 2017 for $171.3 million in cash, and added it to the company’s Broadcast Solutions segment for reporting purposes.

Including Thinklogical, Belden has invested $779.4 million in the broadcast industry since 2009.  When the company discloses the price paid for S-A-M, the thoal amouint will be known.

This level of investment is reminiscent of previous industry “roll-ups.”

Between 2000 and 2009, Harris Corporation spent approximately $1 billion on the acquisitions of vendors including Louth, Encoda, and Leitch. In 2012, Harris Corporation divested its broadcast division in a deal valued at up to $225 million.

A decade earlier, Technicolor (then Thomson) spent even more to acquire a slew of media technology supplier including 5 businesses of the Philips Professional Broadcast group (Cameras, Film Imaging, Signal Processing, Media Networking and Control & Systems), Canopus, PRN, ParkerVision, Nexstream, Thales Broadcast & Multimedia, and (coincidentally) Grass Valley.

Starting in 2010, Technicolor divested these businesses in separate transactions:

 

So why does Belden think it will be different for them?

Speaking at the 2017 Devoncroft Media Technology Business Summit, Belden CEO John Stroup said “Of all the industries we’re in, [media and broadcast] is the industry where the economic capabilities of the vendors are the least developed, and that creates a lot of stress for us.

Belden CEO John Stroup at 2017 Devoncroft Media Technology Executive Summit

Belden CEO John Stroup at 2017 Devoncroft Media Technology Executive Summit

“We would obviously prefer that all vendors were making good economic investments, because [today] we’re all investing in everything, and that doesn’t lead to particularly good economic returns. I think we’re all searching for a level of scale, because I think this is a business that requires a lot of scale from a commercial point-of-view. To operate globally, you need to generate the amount of revenue that gives you the scale from an R&D point of view. So, what we’ve been trying to do with our team is teach them different ways to evaluate how much to be spending, where to be spending, and trying to put some rigor and framework around it so we’re not doing anything that’s reckless. Some vendors have gotten themselves into problems…. We’re trying to really careful of where we place our bets.”

With the S-A-M deal, Belden achieves greater scale.

Additionally, the company has previously telegraphed its plan to build a factory in India, in order to lower its cost of production (it is unknown at this time whether the production of Grass Valley or S-A-M products will move to this factory once it opens).

 

Greater Control of the IP Transition?

Belden executives often speak about how industry-wide transition to IP-based infrastructure provides potential growth opportunities for Grass Valley. During Belden’s Q4 2017 earnings call, Stroup said Q4 2017 was Grass Valley’s strongest-ever quarter for sales of IP-based systems, and predicted that IP shipments would accelerate in the future, thanks to the adoption of new standards and increasing custom confidence in IP-based solutions. “We think [the finalization of the SMPTE 2110 standard is] an important development and certainly going to be helpful moving into 2018. We had our strongest quarter ever in IT-based product revenues in the fourth quarter. It was over $5 million. And it was to 36 different customers. So, it’s clear that our customers are getting more confident, more comfortable with the technology. I think they view us as really one of the only solutions that meets the open standard. As we’ve talked about, we have some competitors that have done very well, but their systems and their solutions are far more closed than what we’re offering and what the standard dictates. So, I think that the Grass Valley business, from a product point of view, is very well positioned moving into 2018.”

Indeed, as one of the three founders of AIMS, Grass Valley is a key player in the industry-wide transition to IP-based operations. The acquisition of S-A-M puts Grass Valley in control of more potential IP-related infrastructure refresh projects.

Because the broadcast industry is dwarfed by the broader IT market, the IT “titans” (such as Arista, Cisco, Huawei, and Juniper) tend to use established broadcast suppliers as a route to market.  By acquiring S-A-M, Belden now owns two of the top “traditional broadcast vendors,” making it more likely that they will successfully capture market share as the industry transitions to IP-based operations.

 

 

The Belden M&A Strategy

It shouldn’t be a surprise that Belden made this acquisition, over the past decade, the company has grown substantially through strategic M&A.

As recently as December 2017, Indeed, Belden routinely touts it well-established approach of acquiring underperforming assets, and generating synergies and cost savings through what it calls “The Belden Business System.”

During its December 2017 analyst day, Stroup told analysts “we continue to actively pursue a number of attractive inorganic opportunities. We currently have $475 million available for inorganic opportunities. We estimate that approximately $1.7 billion will be available through 2020. This will come from organic activities and it would be at or below net leverage of 3 times.

 

“Over the last three years, approximately 75% of capital deployment has been allocated towards M&A. Going forward, we expect to allocate approximately 55% towards M&A.

“Our acquisition approach always begins with our strategic plan. Nothing enters our funnel of opportunities, nothing begins cultivation until we identify an opportunity as either allowing us to take advantage of an opportunity or to address a threat.

 

“The companies that we pursue are typically company leaders within their specific area, often niches. They have products that are complementary to ours and typically there are opportunities for significant costs or commercial synergies.

“Typical bolt-on for Belden would be a company with revenue growth that is similar to Belden’s end markets. Gross profit margins are typically greater than Belden. However, EBITDA margins are typically lower than the Belden average.

 

And by applying our Lean enterprise system, we have the opportunity to achieve EBITDA margins at or above Belden average, achieve ROIC of 13% to 15% by year three and purchase the company for a post-synergy multiple of approximately seven times EBITDA.”

 

Related Content:

Grass Valley Q4 2017 Revenue Impacted by Revenue Recognition, Predicts Growth for 2018

Broadcast Vendor M&A: Belden Completes Acquisition of Grass Valley, Will Invest $25 Million in Integration of Combined Business

More Broadcast Vendor M&A: Belden Buys Miranda for $350 Million in All-Cash Deal

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© Devoncroft Partners 2009-2018.  All Rights Reserved.

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Media Service Provider Vubiquity Acquired by Amdocs

broadcast technology market research, Broadcast Vendor M&A, Conference Sessions, Media Services M&A, OTT Video | Posted by Josh Stinehour
Feb 01 2018

Multi-billion dollar, multi-national Amdocs has signed a definitive agreement to acquire media service provider Vubiquity.

The $224 million cash deal has been approved by both the Boards of Directors of Vubiquity and Amdocs, and is expected to close during the second quarter of FY2018.

Amdocs (NASDAQ: DOX) is a provider customer service software to communications and media customers such as OSS (operational support systems) and BSS (business support systems) systems.  This acquisition is a significant expansion into the media industry for Amdocs, who did not have a booth at this past IBC and does not have a booth at this upcoming NAB Show (at the time of this writing).

Amdocs had already started to move deeper into the media technology sector with its September 2016 acquisition of Vindicia, a provider of subscription and payment solutions.  Vindicia’s payment solutions support several digital offers such as the BBC & iTV Britbox service and NBA League Pass. Amdocs purchased Vindicia for $90M.

This acquisition is a much further move into the media supply chain.  Vubiquity is a managed service provider connecting content owners and publishers with video distributors – both traditional PayTV operators and OTT publishers.  In its collateral Vubiquity cites relationships with over 650 premium content producers (film studios, television networks, etc …) and over 1,000 global video distributors (PayTV operators, OTT publishers, etc …).

Vubiquity had raised a total of $237.2 million over four rounds of funding between 2007 and 2012.  Current private equity owners include Columbia Capital and The Carlyle Group, whom invested $100 million of new funding as part of the Company’s purchase of SeaChange’s On Demand Group in 2012.

A series of M&A transactions built Vubiquity, beginning with the 2009 merger of Avail Media and TVN Entertainment – subsequently “Avail-TVN.”  Avail-TVN rebranded as Vubiquity in early 2013.

Later in 2013, Darcy Antonellis, then Warner Bros. CTO, joined Vubiquity as CEO.  Darcy’s notable resume also includes two speaking appearances at Devoncroft’s annual Media Technology Business Summit (see photo on left).  At the closing of the transaction Darcy will join Amdcos as head of the Amdocs Media Division.

More recent deals for the DETE (Digital-End-to-End) service from the Warner Bros. Technical Operations and Juice Worldwide, a digital supply chain solution company, further expanded Vubiquity’s portfolio.

The press release announcing the transaction states the “impact of the acquisition on Amdocs’ diluted non-GAAP earnings per share is expected to be neutral in fiscal year 2018, and accretive thereafter.” Since this is a cash transaction, it is difficult to derive any meaningful view on deal multiples from that statement.  However, Amdocs offered greater detail during its earnings call with analysts.

Tamar Rapaport-Dagim, CFO Amdocs, indicated an expectation of Vubiquity to contribute “approximately $100 million in the first 12 months after closing.” Ms. Rapaport-Dagim continued, “Vubiquity, as you can understand from the message that we think it will be a neutral impact on EPS in fiscal 2018 it’s coming with a low margin to start with. And we believe we can build it up along the time quite quickly, given both the top-line synergies and the cost structure synergies we see in front as opportunities.”

Using expected revenue contribution as a proxy for annual revenue suggests a deal multiple of 2.2x sales.

The stated level of revenue contribution contrasts with several earlier public data points on Vubiquity’s annual sales.  At the time of its rebrand, Management gave public guidance of annual revenue in excess of $250 million. Also, the inc5000 lists Vubiquity’s annual revenue in 2013 at $296.8 million.  Some caution is appropriate in concluding revenue has meaningfully decreased since Vubiquity’s business model may have passed thru content licensing revenue.  Such mechanisms or accounting treatment could result in materially different statements on revenue, depending on the context of the statement.

All communications by Amdocs cited a view of convergence between communications and media & entertainment.  “Investing in the growth engines of tomorrow is a core discipline of Amdocs and we see considerable opportunity resulting from the increased convergence of communications with media and entertainment” stated Eli Gelman, CEO Amdocs.

Mr. Gelman provided further commentary on the rationale during Amdocs earnings call with analysts.

“…we see increasing convergence between traditional wireless and Pay TV distributors, content owners and large OTT players.  By acquiring Vubiquity, we believe Amdocs will be uniquely positioned to address the requirements of distributors, content owners and web players as the lines between each become increasingly blurred.

Second, media and entertainment companies like Disney, HBO and Time Warner are reaching out directly to the end users with a direct content-to-consumer business model or what is called D2C direct-to-consumer. This trend requires new systems to support an improved customer experience that we believe Amdocs is well-positioned to provide.”

 

 

Related Content:

Video Message From Vubiquity and Amdocs Management

 

 

© Devoncroft Partners 2009-2018.  All Rights Reserved.

 

Ericsson Sells Majority Stake in Media Solutions Business

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Josh Stinehour
Jan 31 2018

Ericsson announced two major developments with its media operations: (1) the sale of a majority interest of 51% in its Media Solutions Business to private equity firm One Equity Partners; (2) and its decision to maintain ownership of Ericsson’s former Broadcast and Media Services, which was renamed Red Bee Media in November 2017. 

The Media Solution Business comprises Ericsson’s compression and PayTV product portfolio built in part through the acquisitions of Tandberg Television (2007), Microsoft Mediaroom (2013), Fabrix (2014), Azuki Systems (2014), and Envivio (2015).  Full year revenue for the Media Solution Business is around 3 billion SEK or approximately $380 million USD.

Red Bee Media encompasses Ericsson’s managed services portfolio in the broadcast sector, which was built in part through the acquisitions of Technicolor’s Broadcast Services (2012), Red Bee Media (2013), and FYI Television (2016). Annual revenue for Red Bee Media is approximately 3.5 billion SEK or around $444 million USD.

These announcements came after a nearly nine month evaluation of strategic alternatives for the businesses.  The initial announcement was made shortly before the 2017 NAB Show in March of last year.

Challenging operating performance for these businesses was also initially disclosed in early 2017.  It continued.  Ericsson’s Q3 2017 financial results showed a segment operating margin of -77% for the year-to-date nine month period in the Other segment where the Media Solution and Red Bee Media businesses were reported.  Further financial information indicated Media Solution and Red Bee Media represented around 75% of the sales reported in the Other segment during the third quarter of 2017.  In the most recent announcement, Management stated substantially improvements had been made during 2017, especially in regards to margins.

During its conference call with analysts, Ericsson indicated adjusted operating income for Red Bee Media was approximately -38M USD for 2017, though “steering towards breakeven.”

While improved, the Media Solutions business operating losses remained “substantially higher” than Red Bee Media in 2017.

The majority sale to One Equity Partners is anticipated to close in the third quarter of 2018.  As outlined in the public statements, at the time of closing employees, contractors, and specified assets and liabilities will transfer to the new company.  Since Ericsson is retaining a 49% ownership position, the Company will continue to report its portion of profit and loss in its financial statements.  No financial terms of the transaction were provided.

The decision to retain Red Bee Media was reached after considering a variety of alternatives.  While Ericsson disclosed it receive bids for Red Bee Media, Management concluded these bids did not reflect the value of the business.  In fact, Management stated in its public remarks that “upside from continued development was deemed to be significant.”

Several factors associated with the transaction are worthy of emphasis.  These combined businesses represent around 3% of Ericsson’s annual revenue.  While not significant assets in the context of Ericsson, these are considerable product and service portfolios in the global media technology sector.

The press releases announcing the strategic initiatives admonish several statistics highlighting the significant footprint of these businesses, among these almost 4,000 combined employees and a tier1 list of media customers. The consideration of their customers was apparent in Ericsson’s decision making. In fact, Ericsson’s President and CEO Börje Ekholm made explicit reference to this in the press release, stating “We are confident that the direction we announce today will enable us to create the best long-term value, for both our customers and our shareholders.”

 

 

Related Content:

Ericsson Press Release on Media Solutions Divestiture

Ericsson Press Release on Red Bee Media

 

 

© Devoncroft Partners 2009-2018.  All Rights Reserved.

 

 

Reminder: 2017 NAB Show Media Technology Business Summit is Sunday April 23rd

Analysis, broadcast industry technology trends, broadcast industry trends, Broadcast technology channel strategy, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results, Conference Sessions, market research, Media Services M&A, Online Video, OTT Video | Posted by Joe Zaller
Apr 21 2017

If you are attending the 2017 NAB Show, and you want to understand the commercial and technical issues that are driving the industry forward, you don’t want to miss the sixth annual Media Technology Summit.

11:00am – 3:00pm, Sunday, April 23, 2017

Las Vegas Convention Center, Room N249

We’ve worked hard to bring together an outstanding line-up of technology and business thought leaders from all parts of the media technology ecosystem, and we are very grateful that this incredible group has agreed to take part in this year’s event and share their experiences with our audience.

The full conference agenda is at the bottom of this post.

This summit is the one place at the NAB Show where C-Level executives from each part of the media ecosystem discuss the commercial issues facing their organizations, and how this has and will impact their technology investment and deployment strategies. Whether you are a media company, technology supplier, finance professional, or industry strategist, if you want to understand the executive perspective on business developments in the media technology sector, we’re sure you will find the conference to be a thought-provoking kickoff to the NAB Show. It’s also a great networking opportunity.

In addition to executive panel discussions, we will also provide an overview of the most up-to-date industry market research and analysis.  This includes preliminary findings from the 2017 Devoncroft Partners Big Broadcast Survey, the industry’s definitive demand-side market study, and the 2017 Global Market Valuation Report (GMVR), which is published by IABM DC, a 50-50 joint-venture between Devoncroft Partners and industry trade association IABM.

If you have not yet participated in the 2017 Big Broadcast Survey, you can register here and join thousands of your colleagues worldwide in the definitive study of media industry trends.

If you’d like to attend the Summit, all you need is an NAB Show badge.  So please bring any colleagues interested in the changing landscape of media technology.

You can also register using code ATT2.

This event has been standing-room-only for the past several years, and we are expecting a large turn-out, so please come early.

 

2017 NAB Show Media Technology Business Summit

Conference Agenda

11:05am – Strategic Industry Analysis: Valuations, M&A, and Equity Finance

Joshua Stinehour, Principal Analyst, Devoncroft

 

11:25am – The Broadcast & Media Technology Industry in 2017

Joe Zaller, President, Devoncroft

 

11:50am – The Vendor C-Suite: Strategies for an Evolving Market

David Ross, CEO, Ross Video

Johan Apel, President & CEO, ChyronHego

John Stroup, President, CEO, Belden, Inc.

Ramki Sankaranarayanan, CEO, Prime Focus Technologies

 

12:30pm – Leveraging Hyperscale IT Infrastructure for Next-Generation Media Workflows

Dave Ward, Senior Vice President, Engineering Chief Technology Officer and Chief Architect, Cisco Systems

Keith McAuliffe, Vice President and Chief Technologist, HPE Servers Global Business Unit Hewlett Packard Enterprise

Peter Guglielmino, Media & Entertainment CTO, IBM

Tom Burns, Media & Entertainment CTO, DELL EMC

Moderator: Al Kovalick, Founder, Media Systems Consulting

 

1:15pm – Service Provider C-Suite: Perspectives on the Future of Media Technology

Barry Tishgart, Vice President, Comcast Technology Solutions

Bill Wheaton, Executive Vice President & Chief Strategy Officer, Akamai

Darcy Antonellis, Chief Executive Officer, Vubiquity

Usman Shakeel, Worldwide Technology Leader Media & Entertainment, Amazon Web Services

Moderator: Janet Gardner, President, Perspective Media Group

 

1:50pm – The Broadcaster C-Suite: Trends Driving Investment Decisions

John Honeycutt, CTO Discovery Communications

Renu Thomas, EVP Media Operations, Engineering & IT Disney/ABC Television Group

Richard Friedel, EVP and GM, Fox Network Engineering and Operations

 

2:30pm – The Broadcaster C-Suite: The Opinion of Financial Decision-Makers

Christine Dorfler, Chief Financial Officer, NBCUniversal Owned Television Stations

Joe Dorrego, EVP/CFO, FOX Television Stations

Lucy Rutishauser, Senior Vice President Chief Financial Officer & Treasurer, Sinclair

Michael Tuvell, Senior Vice President Chief Financial Officer, Tribune Media

 

Related Content:

2017 Media Technology Business Summit Agenda on NAB Show website

 

© Devoncroft Partners 2009 – 2017. All Rights Reserved.

 

Telestream to Acquire IneoQuest

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Mar 09 2017

Telestream announced that it has agreed to acquire IneoQuest, a provider of quality control and analytics solutions for broadcast and network providers.  The closing of the transaction remains subject to customary conditions and is expected to occur toward the end of the month.  Telestream-IneoQuest

This is the second test and quality control (QC) firm Telestream has acquired in the past six months.  In September 2016, Telestream purchased UK-based Vidcheck.  It also makes the second acquisition by Telestream
since being acquired by private equity owner GenStar in January 2015.

The terms of the deal were not disclosed.  IneoQuest last publicly disclosed revenue in 2011 (as part of the Inc. 5000), when annual revenue was just below $40 million.  An interview of IneoQuest’s CEO Calvin Harrison, by CEOCFO magazine in April 2013, quoted Calvin as projecting “double digit growth again this year.”  There has been no subsequent guidance on revenue performance by IneoQuest.

Commenting on the transaction, Calvin stated, “We are happy to be joining the Telestream family and are looking forward to seeing our technology contribute to Telestream’s next phase of growth.”

As part of the press release announcing the acquisition, Telestream management focused on how IneoQuest expands Telestream’s existing capabilities in quality control and monitoring.  “When it comes to media processing and delivery, the Telestream brand has become synonymous with quality. With the addition of IneoQuest technology to our existing QC capabilities, our customers will have the ability to monitor quality at any point in the delivery pipeline, making diagnosing and correcting a problem easier than ever before” explained Dan Castles Telestream’s CEO.

 

Related Content:

Telestream Press Release

 

 

© Devoncroft Partners 2009 – 2017. All Rights Reserved.

 

 

Avid Receives Investment from Beijing Jetsen Technology; Signs Exclusive Distributor Agreement

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Jan 31 2017

Beijing Jetsen Technology (“Jetsen”) will invest $18.1 million (USD) in Avid Technology for a minority equity stake of between 5.0% and 9.9%.  Jetsen will also receive a board observer seat on Avid’s board of directors. Closing of the investment is subject to government approvals, which Avid expects to receive during the second quarter of 2017.  Avid_Technology_logo

The final ownership percentage is determined by dividing the investment amount of $18.1 million by the volume-weighted (i.e. denominator is cumulative volume) average market price of Avid’s shares for the 30 days preceding the closing date.  As a reference point, Avid shares closed at $5.03 on Monday, January 30, 2017.  Using this share jetsenlogoprice figure, the investment would equate to an equity stake of approximately 8.2% on a fully diluted basis.

Jetsen is headquartered in Beijing, China and listed on the Shenzhen stock exchange (2011 IPO).  Jetsen’s has operations in several segments of the media sector including an integration services business, a production company, along with investments in film and television programming.  At current exchange rates Jetsen had over $450 million (USD) in total revenue for the twelve month period ending September 2016.  Jetsen is active in several other verticals in addition to media.  Based on a review of its 2015 annual report, media operations accounted for approximately 30% of total revenue.

Avid provided the below summary slide on Jetsen as part of its presentation accompanying the announcement.

jetsen-summary

Concurrent with the investment, Avid entered into a commercial partnership making Jetsen the exclusive (master) distributor of all Avid products and solutions for the Greater China region (encompassing China, Hong Kong, Macau, and Taiwan).  All existing Avid channel partners in Greater China will transfer to Jetsen.  The agreement will also include technical support, with any associated maintenance revenue benefiting Jetsen.

“Jetsen’s strong position in the region, combined with Avid’s market-leading products and comprehensive solutions, presents an exciting opportunity for Greater China’s fast-growing media industry,” said Shengli Han, CEO, Beijing Jetsen Technology.

Avid will receive annual minimum performance guarantees for Greater China amounting to an approximately 15% annual growth for the region.  The growth refers to both recognized revenue and cash received.  The contract has a duration of five years.  The total contract value for the first three years alone represents at least $75 million to Avid.

In addition, Jetsen will take over Avid’s operations in Greater China.  This represents a cost savings to Avid in the amount of $3 million annually.  The below slide from Avid’s presentation offers a summary of the key terms.

jetsen-gotomarket

During the conference call with analysts, Louis Hernandez, Jr., Chairman and Chief Executive Officer of Avid added context on the rationale behind the equity investment by Jetsen.  “They [Jetsen] are really the ones that wanted to infuse equity. We had several ideas we were running to shore up our liquidity and cash not because of our concerns, we know it’s a significant concern to investors, so we wanted to take that out of the equation so they focus on what’s about to happen with the end of the transformation, and but that’s something they wanted to do. As long as we structured in a way that would minimize dilution, we are open minded to it and that’s where what how we ended up.” said Hernandez.

Throughout the conference call with analysts Louis Hernandez, Jr. referenced Avid’s ongoing transformation, which management has communicated will end with the second quarter of 2017.  Consistent with this message, Hernandez added the following commentary on the Jetsen agreement, “As we start to enter the next phase of Avid’s strategy, our agreement with Jetsen will give us much stronger go-to-market capabilities to expand our market position, drive consistent business growth and have the needed partner to accelerate our cloud-enabled Avid Everywhere strategy across Greater China.”

 

 

Related Content:

Avid Press Release on Beijing Jetsen Technology Agreement

Avid Presentation on Beijing Jetsen Technology Agreement

 

 

© Devoncroft Partners 2009-2017.  All Rights Reserved.

 

 

Vitec Group acquires Wooden Camera for Consideration Up to $35 million

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Sep 20 2016

The Vitec Group has acquired Wooden Camera, a provider of camera accessories including baseplates, cages, hand grips, matte boxes, monitor mounts, shoulder rigs, and zip boxes.  deal-logo

Wooden Camera is based in Dallas, Texas and privately owned by its management team, Ryan and Elizabeth Schorman.  Both will remain with business post-acquisition.  Wooden Camera will become part of Vitec’s Broadcast Division.

The press release announcing the acquisitions cites the opportunity to grow Wooden Camera through expanded distribution as part of Vitec’s global sales network.  Also noted in the announcement is the opportunity for Wooden Camera to benefit from Vitec’s manufacturing and product sourcing capabilities.

As part of the acquisition announcement The Vitec Group disclosed portions of Wooden Camera’s recent financial results along with the high-level deal terms.

Wooden Camera generated an unaudited adjusted EBITDA of £1.9 million ($2.5 million) for the 2015 calendar year.   Management indicated Wooden Camera has grown in the year-to-date period of 2016.

The upfront cash consideration is £15.3 million ($20.0 million), which is subject to post-closing adjustments.  The deal also includes a potential earn out representing an additional £11.5 million ($15.0 million) of consideration.  The earn out payments are based on Wooden Camera achieving “demanding” EBITDA targets for the financial periods thru the close of the 2018 calendar year.  The 2018 EBITDA target is $7.3 million (this represents an almost tripling of 2015 EBITDA).   Vitec will finance the transaction using its existing banking facility.

Using the 2015 EBITDA disclosure, the upfront consideration values Wooden Camera at 8.0x 2015 EBITDA (not including the earn-out).  The total consideration has the potential to value Wooden Camera at 17.5x 2015 EBITDA.  Since more than 40 percent of the total potential deal value is in the form of an aggressive earn-out, it is more appropriate to focus on the implied valuation of the upfront consideration.  The multiple of 2016 EBITDA – though unavailable – is likely less since Wooden Camera has continued to grow.

To put these figures in context, The Vitec Group currently trades in the public markets at a valuation of 7.8x trailing twelve month EBITDA and 1.0x trailing twelve months of revenue (on an enterprise value basis).

The press release states “The Board expects the acquisition to be immediately earnings enhancing.”  This statement is then clarified in the notes to the press release as follows, “This statement should not be taken to mean that earnings per share of The Vitec Group plc will necessarily exceed or be lower than historic earnings per share of The Vitec Group plc and no forecast is intended or implied. This refers to earnings before charges associated with acquisition of businesses.”

It is interesting to reflect on the impact of a weaker GBP currency on the transaction pricing.  The “Brexit” referendum of June 23, 2016 precipitated a decline of the GBP versus the US dollar.  A weaker GBP should – on balance – benefit Vitec’s revenue results.  However, it will make expenditures in other currencies more expensive, including the acquisition of a US-based business as is the case with Wooden Camera.  On June 1, 2016 the exchange rate was 1.44 USD / GBP.  The figures in The Vitec Group press release were based on an exchange rate of 1.31 USD / GBP or 9% lower.  Meaning, the acquisition in GBP terms was 9% more expensive because of the recent disruption in the GBP currency.

The Vitec Group often structures its acquisitions with a substantial portion of contingent consideration.  This was also the case in the recent acquisitions of Offhollywood, SmallHD, and Teradek.

Commenting on the acquisition Vitec’s Group Chief Executive Stephen Bird stated, “I am delighted to welcome the Wooden Camera team to Vitec. Wooden Camera’s products are the glue that binds all the building blocks together on a professional camera system.  This leading business complements Vitec’s strategy of providing premium branded broadcast products and services to our customers to capture and share exceptional images. The business has great prospects and we anticipate that it will generate a good return on our investment.”

 

 

Related Content:

Vitec Group Press Release on Wooden Camera Acquisition

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Media Tech Vendor M&A: Blackmagic Design Acquires Ultimatte

broadcast technology market research, Broadcast Vendor M&A | Posted by Joe Zaller
Sep 09 2016

Blackmagic Design today announced it has acquired blue and green screen Ultimatte.

Terms of the deal were not disclosed.

Ultimatte was founded in 1976 and has won an Emmy for their realtime compositing technology, a Lifetime Achievement Award from the Academy of Motion Picture Arts and Sciences, as well as an Oscar.

Ultimatte is known worldwide for delivering broadcast quality compositing results that make virtual sets indistinguishable from real sets. Ultimatte creates realtime blue and green screen removal hardware that is used in broadcast studios around the world to seamlessly composite reporters, talk show hosts and more into virtual sets. Almost every newscaster and weather reporter stands in front of a green or blue screen while delivering the news and weather. For the past 40 years, Ultimatte has been the industry standard hardware or software responsible for keying these people in front of weather maps, stock charts, and other info graphics. In fact, many of these newscasters are using Ultimatte to place them into completely virtual sets.
Ultimatte uses advanced 4:4:4:4 image processing and provides enhanced matte controls that lets customers accurately separate the subject from the background. Customers also get matte correction features, indirect and direct lighting features, spill suppression tools, edge artifact controls and more, all in realtime.
“Ultimatte’s realtime blue and green screen compositing solutions have been the standard for 40 years,” said Grant Petty, Blackmagic Design CEO. “Ultimatte has been used by virtually every major broadcast network in the world. We are thrilled to bring Ultimatte and Blackmagic Design together, and are excited about continuing to build innovative products for our customers!”

 

Media Tech Vendor M&A: Telestream Buys Vidcheck

Broadcast technology channel strategy, Broadcast Vendor M&A | Posted by Joe Zaller
Sep 05 2016

telestream-logo-transparant

Telestream announced that it has acquired Vidcheck, a provider of automated quality control (QC) solutions for broadcast and media technology applications.

Vidcheck_Logo

The deal, which was funded by cash from operations, has been completed. Terms were not disclosed.

Vidcheck founder Tom Dove will remain with the enlarged company.

The Vidcheck deal is Telestream’s sixth acquisition.  Similar to its recent purchases of cloud encoding company Panda, and captioning specialist CPC, Telestream CEO Dan Castles described the Vidcheck deal as a “tuck-in,” rather than a transformation. Although Telestream’s Vantage workflow orchestration platform currently includes an option called Analysis, the company believes that it can drive greater value for its customers by offering Vidcheck’s automated file-based QC software as part of its overall offering.

“Vidcheck’s team and product portfolio line up very well with our area of expertise,” said Castles. “It is not just some great technology and products that we are acquiring but also a gifted, talented and passionate team that will reinforce our resources here at Telestream. We look forward to leveraging our combined know-how to offer our worldwide customer base an even more complete and exciting product portfolio.”

Telestream says it will also continue to integrate and interoperate with multiple QC vendors, as it already does today.

 

© Devoncroft Partners 2009-2016. All Rights Reserved.

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