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October extends infotech M&A boom as new adviser mediates top deal

October extended a year of booming information technology M&A deal-making, with familiar advisers taking on some of the biggest transactions, along with at least one sophomore firm.

M&A activity in the sector was up 20.6% year over year in October with 252 deals recorded by S&P Global Market Intelligence. The jump in activity is notable because M&A activity had returned to normal by October 2020 after a pandemic-related dip. The 209 transactions recorded a year ago were 0.5% more than the same month in 2019, itself a healthy year for information technology deal activity.

The boom year has seen some of the country's familiar financial advisers cashing in on the white-hot market, and October was no exception. The largest transactions of the month saw JPMorgan Chase & Co., The Goldman Sachs Group Inc. and Evercore Inc. help mediate terms.

However, some smaller firms also gained ground in 2021 against some of the biggest names. Boutique adviser Qatalyst Partners LP, for example, maintained strong momentum in the information technology deal league tables against the country's megabanks. The firm consulted the seller on the fourth largest sector transaction in October, Cint Group AB (publ)'s $1.05 billion acquisition of Lucid Holdings LLC, a consolidation of supply-chain data and insight companies.

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Advisers from Centerview Partners LLC returned in October to consult on the month's two largest transactions: Emerson Electric Co.'s $6.34 billion 55% acquisition of industrial-asset optimization company Aspen Technology Inc. and Zendesk Inc.'s $4.78 billion acquisition of fellow survey and feedback company Momentive Global Inc.

Centerview will consult the buyer on both transactions, and on both deals, it will partner with Goldman Sachs. The seller in both deals will be represented by J.P. Morgan. Allen & Company Inc. will join J.P. Morgan on the Zendesk deal.

The Zendesk transaction specifically highlights a blossoming trend in the information technology sector, according to 451 Research. As more and more companies compete online, customer experience and business optimization are increasingly important.

While Zendesk already offers customer management solutions, adding Momentive, the parent company of GetFeedback and SurveyMonkey, will expand Zendesk's stack to include a broader array of feedback tools and response options. These kinds of service technology investments are mushrooming post-COVID-19, and acquirers are paying a premium to expand their reach in the space. Zendesk paid 10.9x Momentive's 2020 revenue for the company.

October also saw a new face among the biggest information technology transaction advisers as LUMA Partners LLC advised on a transaction between Twitter Inc. and newly public AppLovin Corp., which provides marketing and monetization services to digital application developers.

In the transaction, AppLovin will acquire Twitter's MoPub Inc. digital advertising and mobile transaction service for $1.05 billion in the fifth largest information technology deal of the month. LUMA will consult AppLovin on the deal.

LUMA has only been taking transaction clients since 2011, according to S&P Capital IQ, and the MoPub transaction will be its second-largest M&A deal advised to date. The largest M&A deal for LUMA to date is Magnite Inc.'s $1.14 billion acquisition of SpotX, which closed in April. LUMA is the only financial adviser listed on the MoPub deal.

Outside of M&A transactions, LUMA has worked with AppLovin once before, on its $2.0 billion IPO listing in March. AppLovin shares have gained about 32% since its IPO opening, outperforming the S&P U.S. BMI Information Technology Index, which added about 17% in that time period.

The largest capital offering LUMA has ever participated in was Snap Inc.'s $3.4 billion IPO in 2017.

The firm bills itself as an investment bank focused on digital media and marketing with offices in New York and Palo Alto, Calif., and it has worked with 27 clients since 2011.

AppLovin's acquisition of MoPub will add MoPub's auction technology and expand its potential client base, according to 451. The company depends on selling advertising inventory at scale, and adding MoPub will potentially expand its demand pool at a time that AppLovin is expanding its inventory with a move into gaming.

The deal is valued at 5.6x MoPub's 2020 revenue, according to 451, which is modest for the information technology sector in 2021 but also comes at a time tech M&A prices are receding from midyear highs.

451 Research is part of S&P Global Market Intelligence.