Daiwa's European mergers and acquisitions arm, DC Advisory, enabled the private equity owners of media and PR monitoring service Gorkana to find the ideal industry buyer.

Convergence has evolved. It used to describe the coming together of IT, telecoms, media and entertainment. Now it is more likely to mean the marriage of IT and marketing services. A recent example was provided by the sale of media intelligence specialist Gorkana, which was advised by DC Advisory.

London-based DC Advisory was Close Brothers Corporate Finance until it was bought by Daiwa five years ago. It has no balance sheet to deploy and has always been a pure advisory shop. More than half of its business is done with private equity houses and their portfolio companies.

It employs some 200 people, half of them in London and the rest in its offices in France and Germany. In Europe, it ranks as the number two middle-market advisory firm (deals of £50m [78.46m] to £500m) after Rothschild, according to Mergermarket.

Its largest ever deal was the sale by ICG of patent management group CPA Global to Cinven for £950m in 2012. But its bread and butter comes from deals closer to the £200m mark. More recently it advised Bridgepoint on its £212m purchase of Moneycorp, and Morgan Stanley Global Private Equity on its £240m sale of Zenith Vehicle Contracts to HgCapital.

Data analysis

The world of marketing has grown very noisy and fragmented, making it harder to get a message across. However, an explosion of data provides opportunities to target those messages very precisely. This is fuelling merger activity. Earlier this year, for example, DC Advisory advised Advideum, a video advertising technology business, on its sale to German media giant Bertelsmann.

“We have done a lot of work in marketing services,” says Nathaniel Cooper, the DC Advisory director who led the Gorkana transaction.

The Gorkana deal has a long history, stretching back as far as 1880, when Durrants started a UK press clipping service. That has since morphed into a 'media monitoring' business, acquired by Exponent Private Equity in 2008. Two years later, Exponent bought Gorkana, a PR and media website, and folded Durrants into it.

At Gorkana, the combined business maintains a database of journalists for PR professionals to consult. As well as keeping tabs on newspapers and magazines, it gets electronic feeds from websites and social media. Having monitored its clients’ media coverage, it can then analyse its impact, while providing a reputation management service along similar lines.

Gorkana's rise

Gorkana has offices in London and New York, and a growing business in the German-speaking countries of Europe. It provides its services in more than 150 countries in some 50 languages, serving 35,000 communications professionals every day.

Historically, the clippings business had not really existed in the US, though Gorkana had begun to trade there in a material way. A US company called Vocus entered the market with a different, technology-focused model, creating cloud-based software for companies to track their own media coverage.

“The product suits medium-sized companies, whose needs are not complex and demanding,” says Richard Madden, chief executive of DC Advisory. “Gorkana, on the other hand, has been successful in selling to bigger US companies.”

DC Advisory had known Exponent since 2004, shortly after the private equity firm was founded, and it was an advisor on the debt when Exponent first bought Gorkana.

Frontrunner drops out

So when the private equity firm decided in early 2014 that it was time to sell Gorkana, DC Advisory was appointed sole advisor on the impending sale. Enter GTCR, a Chicago-based private equity firm which earlier this year had bought Vocus. It also bought a very similar Swedish firm, Cision, and married the two together.

“In PR campaign software, it owns the market,” says Mr Madden. “But it didn’t have value-adding analysis and reputation management.”

In any sale of Gorkana, then, it seemed obvious who the ideal buyer would be. Except that GTCR was not in the market, saying that it wanted more time to digest Vocus and Cision.

While a disappointment, this was good for the auction process in one way, as Mr Madden explains. “The problem was that most other potential bidders had preconceptions about Vocus,” he says. “Since they all thought their own bids would fail, they were disinclined to engage.”

Having been rebuffed by GTCR, DC Advisory could now tell other potential bidders that Vocus had ruled itself out and, that, if they did engage, there was a real chance that they could end up buying Gorkana. There was a number of likely trade bidders, including an Australian-based media monitoring business specialising in Asia, US PR distribution businesses and other US and European information services.

“After we had eliminated GTCR, we lined up trade bidders around the world,” says Mr Madden. “There was interest from Asia, through our link with Daiwa, which has a strong Asian business.”

Healthy appeal

The attractions of Gorkana were that it was a growing business with very healthy margins, a good cash generator with international growth prospects. That would also appeal to other private equity houses.

“To encourage private equity bidders, we ran a debt process,” says DC Advisory associate Vanessa Totah. “We presented the opportunity to traditional banks and institutional lenders. They liked the resilient business model, the strong earnings and the diversified customer base.”

The debt process adds a certain value to the sale process since, as Mr Madden says, five bidders going separately to the banks can get quite messy. “It’s much cleaner and crisper if we do it on our side,” he adds.

DC Advisory can line up these potential debt packages in a way that many other advisors cannot. ”Larger banks can’t do it if they are giving advice, because they are conflicted,” says Mr Madden. “Smaller advisors don’t have a debt team.”

Select group

DC Advisory assembled an information package including the financials and key selling points and distributed it to a “carefully selected” group of bidders. It will not say how many but it always tries not to “spray and pray”, in Mr Madden’s words. “We want to make sure they can afford it and that they have a general intention of following through.”

Given the delay caused by the abortive negotiation with GTCR, the process now ran into mid-2014. The information memorandum and diligence materials were still issued just before the summer break, but the first round was extended from the normal four or five weeks to seven.

At the end of the first round, bidders came back with a price they were prepared to pay. “At that point we weeded out the low bidders and the flaky ones  – we need to make sure that the bids are solid,” says Mr Cooper.

The surviving bidders were then treated to a management presentation in order to whet their enthusiasm. The second round was due to take another five weeks but, at this point, there was an awkward moment. GTCR got in touch to say it had changed its mind and wanted to bid. It seems that the undeniable strategic virtues of the deal, which it had not quite understood at first, had now sunk in.

“It was uncomfortable, but it was what it was,” says Mr Madden. “Initially, we held it off but it was determined, and moved very fast with a compelling, deliverable bid.”

GTCR won its prize. The sum it paid was never revealed but is thought to be not too far short of £200m, making this a textbook DC Advisory transaction.

“This is a very real theme in mergers and acquisitions, the blurring of the lines between marketing and PR budgets, and the combining of software and human editorial content,” says Mr Cooper. “This deal shows that US trade and private equity interests continue to be active in Europe, and that they are more focused on strategic fit than on geographic boundaries.”


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