MediaBridge Capital Advisors is pleased to be attending NAB 2022. Managing Partners Ethan Jacks, John Bowen, and Courtney Spencer, along with Managing Director Rob Levy will be in attendance throughout the Show. We look forward to meeting with our colleagues and partners in all market segments of the industry, discussing your strategic growth plans and options, and sharing our perspective on our recent transactions and other significant M&A and Private Equity financing transactions.
Mergers and acquisitions (M&A) activity in the media technology sector has continued to thrive despite the challenges imposed by the pandemic and world events. Since January 2021 MediaBridge Capital, a leader for over a decade in originating and managing media tech M&A transactions, has closed six significant M&A deals, as highlighted below.
Media sector businesses were impacted by the pandemic in a variety of ways, with supply chain issues posing a nearly universal problem on the hardware side. Creative deal structure solutions had to be developed to establish fair, long-term valuations for companies impacted by these transitory challenges. The future, however, looks promising as pandemic constraints fade and buyers/investors continue to actively pursue their growth strategies, and new market segments like the “creator economy” become increasingly significant. The following is a brief summary of our six recent transactions, which included both software and hardware vendors, in the video, audio, and IP management sectors. These deals offer important insights regarding evolving trends in the media technology M&A marketplace.
1. REAL Software Systems was acquired by Rightsline in March 2022.
REAL Software Systems, a leading provider of IP Commerce software globally managing over $12 billion in royalties annually, was acquired by Rightsline, an LA-based company that offers a cloud-based IP Commerce deal, rights, strategy, and finance platform serving global IP owners across several industries including media and entertainment, gaming, and publishing. Rightsline is a portfolio company of Klass Capital, a Toronto-based private equity firm focused on leading cloud-based enterprise software vendors.
2. Audix was acquired by Vitec Group in January 2022.
Based in Oregon, Audix is a leading full-line manufacturer of professional microphones and headphones for the professional audio and installed/commercial sound markets. Audix was acquired by The Vitec Group plc, a publicly traded UK-based global provider of premium-branded hardware products and software solutions to the professional media and fast-growing content creation market, for a purchase price of up to $54.3 million in cash and other consideration.
3. Sound Devices was acquired by Audiotonix in November 2021.
Sound Devices, a Wisconsin-based pioneering manufacturer of premier audio production equipment, was acquired by Audiotonix, a UK-based global market leader in professional audio mixing consoles and related products for the live sound, broadcast, and studio markets. Sound Devices is a leading manufacturer of professional recording/mixing and wireless microphone systems for field and studio production of film and television and has won multiple industry awards. Audiotonix is a portfolio company of Ardian, a global private equity firm.
4. Kino Flo was acquired by Chauvet in August 2021.
Kino Flo, a Southern California-based pioneer in professional lighting systems and color science technologies focused on cinema and television production, was acquired by Chauvet & Sons, a Florida-based leading global provider of professional lighting solutions ranging from concert touring to festivals, theater, broadcast, corporate, and architectural applications. Kino Flo is a well-established Oscar® winning technology innovator, and its products are used in film and television production worldwide. Chauvet is a portfolio company of The Cortec Group, an NYC-based private equity firm.
5. Townsend Labs assets were acquired by Universal Audio in July 2021.
The assets of Townsend Labs, an innovator in software-based microphone modeling technology, were acquired by Universal Audio, a leading Silicon Valley-based manufacturer of professional audio recording hardware and software. Townsend’s proprietary Sphere L22™ microphone system accurately models the characteristics of the most sought-after large-diaphragm condenser microphones and allows selection of different mics and patterns even after the recording is completed.
6. FileCatalyst was acquired by HelpSystems in January 2021.
Unlimi-Tech Software is the developer of FileCatalyst, an Emmy® award winning accelerated-file-transfer solution, designed to optimize and transfer extremely large files swiftly and securely across global networks. The acquisition of FileCatalyst expands HelpSystems’ existing managed file transfer and robotic process automation offerings. HelpSystems is a portfolio company of Boston-based private equity firm TA Associates.
Key characteristics of these 6 transactions and trends for M&A in the media technology sector.
1. Clients are primarily founder-owner companies.
Five of the six companies mentioned above were owned by the founder(s) at the time of sale. In many cases the owners had been operating their business for decades and were ready to achieve a liquidity event while also placing a high priority on putting their company in the hands of strong and trusted stewards for their company’s customers and employees.
2. Growth of private equity backed buyers in our industry.
REAL Software Systems, Sound Devices, Kino Flo, and FileCatalyst were acquired by ‘platform companies’, controlled by private equity (PE) firms. Platform companies are expected to grow both organically and by acquisition. The presence of PE-backed buyers has significantly changed the face of M&A in the past 20 years and has created important new options for sellers who are seeking to maximize their valuations and expand the field of potential buyers of their business.
3. Growing importance of audio-focused companies.
Of these six deals, three of the sellers – Audix, Sound Devices, and Townsend – are in the audio sector. Audio is a major focus for MediaBridge, and we believe it will show continued vitality as a growing number of strategic buyers and financial investors demonstrate strong interest in acquiring or investing in quality professional audio companies. Also noteworthy is that two of the companies are hybrid hardware/software companies, and the products of the third are often married to third-party DSP/software to enable expanded functionality. Both software and hardware are essential components in virtually all forms of audio production. Advanced DSP, whether embedded or standalone, is enabling capabilities that go far beyond traditional audio tools.
4. Transition from on-premise to cloud-based software as a service.
A number of our clients successfully built their businesses using a perpetual license-based business model based on customer-managed infrastructure, and were in the process of transitioning to SaaS at the time of transaction. In each case, the buyer’s business model was cloud-based SaaS.,/p>
5. Importance of scale. Scale is an important driver in today’s media technology M&A market.
Our clients often see the value of joining a larger firm which can help them develop and grow their product lines and distribution networks. Smaller companies often struggle to gain the market visibility needed to grow and larger companies usually have greater ‘clout’ in the competition for strong global distribution, and in marshalling R&D, purchasing and other resources to maximize the strengths of their innovation and brands. Becoming part of a larger platform can open the door to heightened opportunities and a bigger playing field.
MediaBridge: Domain expertise, Strategic analysis, and Industry relationships.
MediaBridge Capital’s Global Reach, Vertical Depth™ has never been more relevant. We are uniquely versed in the essential elements of the media technology industry. Our team is comprised of media industry veterans, each with expertise of 20+ years. We are tightly coupled with the buyer universe and know what their strategic interests and timing parameters are. We can explain how product alignment and strategy generate substantial synergies for buyers and sellers. Our expertise has enabled transactions to occur efficiently and smoothly, and we often make critical connections where neither buyer nor seller knew or considered the other party prior to our M&A process.
More than ever, we believe our deep industry relationships and business, financial, technical, and legal expertise are critical to the identification, management, and completion of successful transactions.
