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Strategic Buyers will lead M&A Activity in 2010

January 30th, 2010 3:12PM by Brendon Kensel
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Source: Dow Jones VentureSource

The M&A market the past twelve-months has been weak, but strategic buyers will likely lead an increase in deal activity in 2010. Financial buyers have continued to be challenged with the lack of credit availability while many potential strategic buyers are sitting on cash or have some access to existing lines of credit. We saw an increase in M&A activity in Q4 2009, but I expect deal makers to very creative this year to get deals done.

Since the economic crisis began many firms have streamlined operations and increased their cash positions. This improvement in financial health is expected to produce an increase in mergers and acquisitions as firms try to kick-start their growth.

While venture-backed companies may seek an IPO exit in 2010, I expect strategic buyers to emerge as the more likely exit. According to Dow Jones VentureSource there are 25 venture-backed companies currently in IPO registration, but there were 86 M&A transactions in Q4 2009 generating $7.3 billion. Amazon.com’s (NASDAQ: AMZN) $847 million purchase of Zappos.com was the largest deal of Q4 2009.

Mergers and acquisitions are off to a brisk start in Q1 2010 with several transactions in the media and marketing sectors. A few deals follow: Dentsu, Japan’s largest ad agency, acquired Innovation Interactive, the parent of digital ad shop 360i; AOL (NYSE: AOL) acquired StudioNow, an online platform for content creation and distribution, for $36.5 million in cash and stock; and LivePerson acquired web analytics company NuConomy for $3 million.

I contacted Alexander Haislip, senior writer at Thomson Reuters’ Venture Capital Journal and a columnist for Private Equity Hub, to get his point-of-view on the M&A outlook for 2010, particularly in the cleantech sector. “There’s a great opportunity for innovation in the cleantech M&A where startups license their technology to big manufacturers who can put it directly into production,” commented Mr. Haislip. “Project financing for cleantech is way off levels we saw just a few years before and it is harder for ever for entrepreneurs to connect with expansion capital. Investors may find their best hope for at least partial liquidity in 2010 is through licensing. That’ll mean tangoing with the likes of The ABB Group (NYSE: ABB), GE (NYSE: GE), First Solar (NASDAQ: FSLR), and a host of other biggies that have yet to make their intentions known.”

High Performance in Business & Sports Panel Discussion

April 25th, 2009 12:03PM by Brendon Kensel
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From left to right: Brendon Kensel, Managing Partner of Kensel & Co.; Kyle Sherman, EVP of Advertising & Sales of Fox Sports Network; David Meltzer, COO of Leigh Steinberg Sports & Entertainment; Ed Arnold, anchor at KOCE-TV; Dennis Kuhl, President of the Los Angeles Angels of Anaheim; and Bob Wagner, CMO of the Anaheim Ducks & Honda Center.

In February I chaired a panel focused on high performance in business and sports that was hosted by Pepperdine’s Graziadio Alumni Network of Orange County. The panelists included: Dennis Kuhl, President of the Los Angeles Angels of Anaheim; Bob Wagner, CMO of the Anaheim Ducks & Honda Center; Kyle Sherman, EVP of Advertising & Sales of Fox Sports Network; and David Meltzer, COO of Leigh Steinberg Sports & Entertainment. The panel was moderated by Ed Arnold, anchor at KOCE-TV and longtime sportscaster for KTLA-TV and KABC-TV in Los Angeles.

Dennis Kuhl discussed his philosophy on building a winning organization – a topic he knows well having participated in the Angels playoff run that resulted in winning the MLB World Series in 2002. Bob Wagner also shared insights on building a high-performing unit. The Anaheim Ducks won the Stanley Cup in 2007. These two panelists also discussed cultivating sports fans in Southern California, navigating attendance challenges in a down economy, and their paths into pro sports leadership roles.

Kyle Sherman discussed the advertising environment and working with franchises to create authentic sports content and experiences for local fan bases. David Meltzer described working with mega-agent Leigh Steinberg and the rapidly changing world of athlete representation.

Ed Arnold, a veteran sportscaster, said it best when discussing maintaining performance, “hire winners and you will keep winning.”

The Golden Age of Online Marketing

December 15th, 2008 5:56PM by Ronald Wagner

Despite writing this during the marketing spending doldrums of a cold 2008 winter, I am equally warmed by hot chocolate and a heated optimism about the future of online marketing. In fact, similar to those who feel there are unequalled investment opportunities to be had during this recession, I believe that from this economic shakedown the online marketing sector is going to emerge stronger than ever, creating a Golden Age of Online Marketing.

Data from Q4 2008 shows that online spending slowed along with other media spending; however, investment in online marketing is still on the ascendant (albeit at a slower rate than over the past several years) while other media – particularly traditional media spending – has seen serious declines. By all accounts, 2009 will be a rough year, but through this turmoil I believe the online marketing space will continue to gain traction as the core of marketer strategic focus (and thus, a magnet for marketer spending). In fact, the decidedly oppressive economic backdrop against which this process is taking place actually plays well to the online marketing sector’s historical causes célèbre: better, more measurable marketing programs with clear ROI and immediate impact. So, when CMO’s do take their feet off the spending brake sometime next year (I just knocked on wood), the acceleration effect on this sector will be tremendous!

In addition to the decade-long, broader natural ‘balancing’ of spending across media, where money continues to chase eyeballs, the Internet will further establish itself as the “hub” of marketing focus and expenditures simply because it is uniquely online where companies’ dialogues with customers and prospects increasingly takes place. Per this power position, online marketing firms will increasingly drive client strategy, control brands, and lead trends…thus, as direct beneficiaries of all of the above, the players in this space will enjoy their Golden Age!

Digital Content at the Piper Jaffray Global Internet Summit

November 13th, 2008 3:15PM by Brendon Kensel

I spent the last two days at the Piper Jaffray Global Internet Summit in Laguna Beach, California. The conference covered Internet, online content, media and enterprise software (particularly SaaS).

An area of particular interest was content distribution and the rapid change that is occurring. According to the Piper Jaffray research team many companies are poised to take advantage of a shift towards digital delivery and away from physical delivery. We have seen a massive shift in music distribution with the emergence of the iPod and video is next. The FCC mandate that all television stations cease analog broadcasts on Feb. 17, 2009 will also likely help accelerate this shift. It is estimated by the U.S. General Accounting Office that 28.0 million U.S. households will need to purchase a digital TV (DTV) or a converter box. This will ultimately open the door to real adoption of digital delivery of video since consumers will not have to change behavior, just TV’s, to receive digital content.

The snake pit of digital distribution continues to be rights management and the content owners balancing act between piracy and usability. With no standardized digital rights management (DRM) technology in use it is hit-or-miss for consumers. In September of this year a group led by Fox, Microsoft, NBC Universal, Paramount Pictures, Sony, and Warner Bros. formed Digital Entertainment Content Ecosystem (DECE) to address growing consumer confusion around buying, downloading and playing digital content offered by multiple services by working toward a simple, uniform digital media experience. We shall see…we are still in the early rounds of a long fight.

While there were many interesting panels and some very good presenters including Neil Ashe, President of CBS Interactive, and Jason Kilar, CEO of Hulu, the “ahha” moment came during a panel of young consumers that shared their Internet and mobile usage habits. They asked a room full of 30 and 40-somethings why they needed a TV. The shift to digital is being fully embraced by the next generation…time to catch up!

Note to Digital Agencies: Strategy First

November 2nd, 2008 10:13AM by Ronald Wagner

After having advised several clients seeking to acquire digital agencies I have seen a desire among buyers to pursue firms with strong strategic capabilities. For an acquirer, the advantages inherent to companies that offer digital strategy capabilities include a higher-level client relationship, higher margin revenues, an ongoing stream of new business opportunities created via strategic recommendations, and of course, smart talent. I’ve previously built such a “digital strategy” group and core offering at two different interactive marketing firms to date (blatantly changing one company’s tag-line from “digital marketing services” to “digital marketing strategy and services” to reflect the clear forward focus on strategic partnering with clients), and therein bore witness firsthand to that empowering element, which is now more centrally a decision-turning factor among acquirers in the digital marketing services space.

Welcome

November 1st, 2008 12:50PM by Brendon Kensel

Welcome to the Kensel & Co. blog. This blog will provide insights and analysis on mergers and acquisitions, private equity investments, venture capital, business strategy, and emerging trends in the media, marketing and technology industries. The authors bring a wide range of expertise on these subjects and I encourage you to visit this site regularly for recent posts.