KIT digital Acquires Nunet and The Feedroom for $21 Million
The FeedRoom boasts 80 enterprise customers, including Barnes & Noble, BestBuy, Bristol-Myers Squibb, BusinessWeek, Herbalife, HP, Intel, Metlife, National Geographic, and the US Department of Defense.
Although mobile TV in the UK is not showing the growth as expected, Campion says he has no doubt this market is on the upswing, and in Eastern Europe and Asia is showing exponential growth.
"The ability for brands to connect to mobile devices is the key. I don’t think STB or mobile alone is the answer. A three screen solution is a must for effective communication. I do see mobile as a key growth for IP video and we expect to see mobile TV increase as a proportion of our revenue.
What Else Is In the KIT Bag?
Asked whether this was the end of M&A activity Campion said, "This is a period of consolidation and recouperation. They are significant acquisitions which need to managed very carefully and there is no other buy on the horizon."
Asked what his response would be should Google waving its chequebook, he said, "I believe this is early in our curve. While disciplined in the way we run the business we are aggressively ambitious. Currently IP video accounts for 3% of the world’s moving image distribution revenues. The B2B market is worth at least $400 million and we truly believe IP will be the dominant network and distribution model and that it will get there far quicker than the move from analogue to digital. We’ve done everything we said we would do and we’re very happy to continue growing this market."
Kit recently relocated its global HQ from Dubai to Czech Republic capital Prague. Europe represents 65% of the company’s revenues and Prague houses its global technical operations and delivery hub following KIT’s acquisition of Prague-based Visual Connection in October 2008. Central Europe also affords a more practical location and time zone for expanding the firm’s global business, particularly in the west, where IPTV systems and 3G/4G mobile networks are expanding rapidly.
"In addition to the logistical considerations leading to our centralization of management functions in Prague, we see a long-term boom in mobile and online video in the Eurozone, and see this as an opportunity to further consolidate our clear market share leadership in the region," said Campion.
Merriman Curhan Ford & Co. acted as strategic advisor to KIT digital on its acquisition of The FeedRoom. Nigel Regan, who advises on M&A activity in Europe for KIT, introduced the parties behind the Nunet deal. (Regan is also a contributor to StreamingMediaGlobal.)
Together, the two acquisitions are expected to add $17.5 million of current, annualized revenues from core IP video-based services, and more than $4.5 million in annualized EBITDA to KIT digital. Over 75% of the newly acquired revenues are recurring and subject to long-term contracts. In January 2009, KIT digital’s management said they expected to generate at least $40 million in revenue with approximately 10% operating margin for the year.
The FeedRoom has invested an estimated $35 million in its technology platform since its launch in 1999. Nunet has invested around $22 million since its inception in 1997.
According to a spokesperson for KIT, the acquisitions involved the appointment of several Nunet and FeedRoom executives to KIT digital’s senior management team. Nunet has 56 employees, who will remain based in Cologne under the new ownership. Many of The FeedRoom’s 53 employees will join KIT digital’s operations in New York City, while The FeedRoom’s offices in Seattle and Boston will be added to the KIT digital network.
In April this year KIT acquired UK-based long-form VOD and live streaming specialist Narrowstep.
For more on the KIT acquisitions, including staffing implications for The FeedRoom, see this post onDan Rayburn's Business of Online Video blog.
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