Today, well-known playout services provider Encompass announced it has signed a definitive agreement to acquire UK-based Babcock Media Services. No financial disclosures were included in the announcement.
Encompass has acquired several businesses to expand its operations. Encompass itself was acquired by current majority owner Court Square Capital Partners in late December 2011 from then private equity owner Wasserstein & Co (now EagleTree Capital). The enterprise value of that deal was approximately $594 million. During Wasserstein’s ownership, Encompass had purchased the Content Distribution Business of then Ascent Media in 2010 for $113 million.
Encompass has continued to make selective acquisitions under Court Square’s ownership, including Buenos Aires based TIBA Satellite Services S.A. in November 2012 and the July 2017 acquisition of Sweden-based Modern Times Group’s playout facility in Riga, Lativa. The press release announcing the acquisition of MTG’s facility indicates Encompass’s EMEA business had doubled in the eight months leading up to that acquisition.
Babcock is a large engineering firm (₤4.6 billion revenue in fiscal 2018) based in the United Kingdom and according to its annual report, the largest support provider to the United Kingdom’s Ministry of Defence.
Babcock has never disclosed the size of its Media Service division in its financial reports. The two data points in the public domain offering some guidance on the division’s financial profile are Babcock’s receipt of a 10-year, ₤200 million contract (in 2012) to provide transmission and distribution services to the BBC World Service and Babcock’s February 2015 acquisition of UK-based playout service provider WRN Broadcast. [The preceding paragraph was added after the initial post to make clear Babcock’s media service division is not just the former WRN business described below.]
As part of the press release announcing the 2015 acquisition, the following quote was issued by Leah Holding, Director of Babcock’s Media Services: “Combining these complementary teams unlocks new potential to deliver truly innovative and customer-centric solutions to the media market.”
Babcock acquired WRN for consideration of ₤11.5 million, consisting of the assumption of £1.6 million of debt, payment of £2.4 million cash, and deferred consideration of £7.5 million.
According to regulatory filings, WRN had 2014 revenue of ₤10.9 million and an operating loss of ₤586,000 (for calendar year ending December 31). Using the headline purchase price, the implied trailing revenue multiple is 1.0x – though given the amount of consideration deferred this is more of a best-case scenario multiple. In Babcock’s 2017 Fiscal Annual Report, a goodwill impairment of £2.3 million was recorded “in respect of milestones not reached” by WRN. Meaning it is likely some portion of the deferred consideration was not ultimately paid.
Recent UK regulatory filings suggest the former WRN Broadcast business was experiencing a difficult trading performance. For the year ended March 31, 2016 the group had revenue ₤11.3 million whereas revenues for the year ended March 31, 2017 were ₤3.9 million. For the avoidance of confusion, the previous data point is not representative of the size of Babcock Media Services (my understanding is the business is far larger). There is no disclosure by either Encompass or Babcock explicitly stating any metric of size (revenue, employees, etc …).
The acquisition of Babcock’s Media Services group adds to Encompass’s existing EMEA assets, which included facilities in London and Riga, Latvia (as noted above). One client relationship of particular note is Babcock’s support of DAZN (subsidiary of The Perform Group), a high-profile live sports streaming services. “As part of its partnership with DAZN, Babcock will be responsible for coordinating all aspects of the technical delivery, including comprehensive network monitoring and managing a complex eco-system of suppliers” states the August 2016 press release announcing the partnership.
Babcock’s 2017 Annual Report notes the contract with The Perform Group is a three-year commitment to “distribute live and on-demand sports coverage to any device in Japan and Germany, with further countries expected to be added next year.”
The CEO of Encompass, Chris Walters, cites the expansion into live sports streaming in Encompass’s press release announcing the transaction. “Acquiring Babcock’s Media Services business increases our presence in the EMEA region, expands our video services offering, specifically in the live streaming sports arena, and bolsters our collective relationships with some of the most important media companies and public service broadcasters around the world,” states Walters.
Encompass Press Release: Encompass Acquisition of Babcock Media Services
Babcock Press Release: Babcock Announces Partnerships with DAZN
Encompass Press Release: Encompass Acquisition of MTG facility in Latvia
Babcock Press Release: Babcock Acquisition of WRN Broadcast, February 2015
Babcock Collateral Announcing WRN Broadcast Acquisition
Encompass Press Release: Court Square Capital Partners Acquisition of Encompass
Encompass Press Release: Encompass Acquisition of TIBA, November 2012
Encompass Press Release: Encompass Acquisition of Ascent Media Content Distribution Business
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