broadcast technology market research, Broadcast Vendor M&A, Conference Sessions, Media Services M&A, OTT Video | Posted by Josh Stinehour

Multi-billion dollar, multi-national Amdocs has signed a definitive agreement to acquire media service provider Vubiquity.

The $224 million cash deal has been approved by both the Boards of Directors of Vubiquity and Amdocs, and is expected to close during the second quarter of FY2018.

Amdocs (NASDAQ: DOX) is a provider customer service software to communications and media customers such as OSS (operational support systems) and BSS (business support systems) systems.  This acquisition is a significant expansion into the media industry for Amdocs, who did not have a booth at this past IBC and does not have a booth at this upcoming NAB Show (at the time of this writing).

Amdocs had already started to move deeper into the media technology sector with its September 2016 acquisition of Vindicia, a provider of subscription and payment solutions.  Vindicia’s payment solutions support several digital offers such as the BBC & iTV Britbox service and NBA League Pass. Amdocs purchased Vindicia for $90M.

This acquisition is a much further move into the media supply chain.  Vubiquity is a managed service provider connecting content owners and publishers with video distributors – both traditional PayTV operators and OTT publishers.  In its collateral Vubiquity cites relationships with over 650 premium content producers (film studios, television networks, etc …) and over 1,000 global video distributors (PayTV operators, OTT publishers, etc …).

Vubiquity had raised a total of $237.2 million over four rounds of funding between 2007 and 2012.  Current private equity owners include Columbia Capital and The Carlyle Group, whom invested $100 million of new funding as part of the Company’s purchase of SeaChange’s On Demand Group in 2012.

A series of M&A transactions built Vubiquity, beginning with the 2009 merger of Avail Media and TVN Entertainment – subsequently “Avail-TVN.”  Avail-TVN rebranded as Vubiquity in early 2013.

Later in 2013, Darcy Antonellis, then Warner Bros. CTO, joined Vubiquity as CEO.  Darcy’s notable resume also includes two speaking appearances at Devoncroft’s annual Media Technology Business Summit (see photo on left).  At the closing of the transaction Darcy will join Amdcos as head of the Amdocs Media Division.

More recent deals for the DETE (Digital-End-to-End) service from the Warner Bros. Technical Operations and Juice Worldwide, a digital supply chain solution company, further expanded Vubiquity’s portfolio.

The press release announcing the transaction states the “impact of the acquisition on Amdocs’ diluted non-GAAP earnings per share is expected to be neutral in fiscal year 2018, and accretive thereafter.” Since this is a cash transaction, it is difficult to derive any meaningful view on deal multiples from that statement.  However, Amdocs offered greater detail during its earnings call with analysts.

Tamar Rapaport-Dagim, CFO Amdocs, indicated an expectation of Vubiquity to contribute “approximately $100 million in the first 12 months after closing.” Ms. Rapaport-Dagim continued, “Vubiquity, as you can understand from the message that we think it will be a neutral impact on EPS in fiscal 2018 it’s coming with a low margin to start with. And we believe we can build it up along the time quite quickly, given both the top-line synergies and the cost structure synergies we see in front as opportunities.”

Using expected revenue contribution as a proxy for annual revenue suggests a deal multiple of 2.2x sales.

The stated level of revenue contribution contrasts with several earlier public data points on Vubiquity’s annual sales.  At the time of its rebrand, Management gave public guidance of annual revenue in excess of $250 million. Also, the inc5000 lists Vubiquity’s annual revenue in 2013 at $296.8 million.  Some caution is appropriate in concluding revenue has meaningfully decreased since Vubiquity’s business model may have passed thru content licensing revenue.  Such mechanisms or accounting treatment could result in materially different statements on revenue, depending on the context of the statement.

All communications by Amdocs cited a view of convergence between communications and media & entertainment.  “Investing in the growth engines of tomorrow is a core discipline of Amdocs and we see considerable opportunity resulting from the increased convergence of communications with media and entertainment” stated Eli Gelman, CEO Amdocs.

Mr. Gelman provided further commentary on the rationale during Amdocs earnings call with analysts.

“…we see increasing convergence between traditional wireless and Pay TV distributors, content owners and large OTT players.  By acquiring Vubiquity, we believe Amdocs will be uniquely positioned to address the requirements of distributors, content owners and web players as the lines between each become increasingly blurred.

Second, media and entertainment companies like Disney, HBO and Time Warner are reaching out directly to the end users with a direct content-to-consumer business model or what is called D2C direct-to-consumer. This trend requires new systems to support an improved customer experience that we believe Amdocs is well-positioned to provide.”

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