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Expect a lot of mobile mergers and acquisitions in 2012: Coady Diemar

Mobile merger and acquisition activity increased significantly last year and is expected to grow again in 2012 as mobile continues to be a key driver of consumer behavior, according to investment bank Coady Diemar Partners.

Mobile was one of the most active areas of the digital media and commerce sector, with 72 deals announced in 2011, up 157.1 percent from 2010, Coady Diemar reveals in its recently released year in review report. The value of the deals also grew and was up 319 percent for a total of $18.8 billion.

?Of the eight sectors that we track, mobile experienced the greatest growth in 2011 when considering both number of transactions and deal value,? said Colin R. Knudsen, managing director of Coady Diemar Partners, New York.

?We believe that 2012 will be even more active than 2011,? he said. ?Mobility remains one of the key consumer behavior drivers for this decade and as mobile internet/data usage ramps with smartphone penetration and video consumption and as commerce becomes further facilitated through mobile devices we expect that the demand/requirement for additional spectrum by carriers will compel acquisitions of spectrum and companies offering spectrum optimization products/services/technologies,? he said.

?There will be considerable activity this year in mobile ecommerce solutions and an increasing number of market participants are becoming mobile capable/competent and will conclude that they will need to acquire others to further their own competencies.?

Mobile deals get bigger
Overall, M&A activity in digital media and commerce increased 96 percent on a dollar value basis in 2011 for a total of $116.3 billion. Coady Diemar tracks mergers and acquisitions activity in eight key sectors of the digital media and commerce market including Advertising Technology & Services, Agency & Analytics, Digital Content, eCommerce, Information, Mobile, Social Media and Software.

Strategic purchases are driving much of the activity although financial buyers are increasingly active in larger deals and are willing to pay high multiples for differentiated technology and to enter new markets.

The year saw the average mobile deal size increase substantially driven by several very large transactions such as Google?s acquisition of Motorola Mobility for $9 billion net of cash, Verizon?s purchase of spectrum from SpectrumCo for $3.6 billion and Sony?s buy-in of Sony Ericsson Mobile, valuing that company at $3.4 billion.

?By comparison, in 2010 there were only two significant transactions above $1.0 B in size: ATT?s purchase of spectrum from Qualcomm for $1.9 B and HPs acquisition of Palm for $1.2 B,? Mr. Knudsen said.

Google was the most active acquirer with five announced mobile transactions compared to four in 2010 followed by Facebook with four deals, Nuance, Nokia and RIM with three and two by Twitter and Zynga.

AT&T, T-Mobile reverberations
One of the largest deals of the year was supposed to have been AT&T?s purchase of T-Mobile USA but the deal fell apart several weeks ago on pressure from regulators.

?The terminated ATT/T-Mobile transaction obviously has an outsized impact, given its size, on M&A League Tables,? Mr. Knudsen said. ?It also places considerable pressure on T-Mobile to develop a new strategy which may result in a sale to another significant global player not active in the US currently.

?Clearly the more the carriers invest in 4G and new services the more vibrancy there is the market and investment spend by T-Mobile is lagging,? he said. ?Nevertheless, the consumer trends underlying mobile are so positive that this failed transaction will not result in lower M&A activity in mobile in 2012 and beyond.?

Final Take
Chantal Tode is assoc. editor on Mobile Marketer, New York