Deal Talk: H.I.G. Capital acquires Kantar Media

Good morning. Welcome to the first edition of The Deal Talk where each week we’ll break down a recent M&A deal using first principles thinking.

Today we’re going to be dissecting H.I.G. Capital’s acquisition of Kantar Media that was announced on January 17th.

DEEP DIVE
H.I.G. Capital acquires Kantar Media from Kantar Group for ~$1B, shifting the media measurement and analytics landscape.

The transaction, valued at approximately $1B , will be paid through a combination of cash, non-cash considerations, and a potential bonus depending on how well the company does.

This deal gives H.I.G. Capital a strong foothold in the growing media analytics sector, providing valuable TV ratings and positioning the firm in the growing digital advertising market.

Seller Profile: Kantar Group

Kantar Group, based in London and operating in 90 countries around the world, is a global market research firm with $2.5B in Adjusted Gross Revenues (+3% YoY) and $509m Adjusted EBITDA (+8% YoY with 20.3% margin), ranking as the 10th largest in the world.

Bain Capital owns 60% of Kantar after acquiring a majority stake in 2019 from British ad holding company WPP.

Kantar Group maintains a strong liquidity position of $516M, and offers cross-platform audience measurement, TV advertising and content ratings outside the U.S., and audience profiling.

Jefferies and J.P. Morgan advised Kantar Group for this transaction.

Buyer Profile: H.I.G. Capital

H.I.G. Capital is a global private equity firm with ~$67B  assets under management, specializing in small and mid-sized company investments.

Its current portfolio includes 100+ companies with combined sales greater than $53B.

During this transaction, H.I.G. Capital was advised by Morgan Stanley and ING.

Strategic Rationale

For H.I.G. Capital, this acquisition expands its presence in media analytics, taking advantage of the rising demand for precise audience insights as the TV industry struggles with how to measure audiences.

For Kantar Group, disposing of Kantar Media will further streamline their business model focusing on the core Insights, Profiles and combined Worldpanel/Numerator businesses.

Key Metrics & Financials

H.I.G. Capital acquires Kantar Media for ~$1B through a mixed consideration structure including cash, assets, and performance-based earnouts. Let’s break it down.

From their recent lender update we know Kantar Media currently generates approximately $120M in Adjusted EBITDA.

To estimate Kantar Media's enterprise value, we can use two approaches.

First, we'll analyze typical purchase premiums for similar transactions.

Since we're dealing with private companies, we relied on market data and comparable deals. While large deals (>$10B) typically see premiums of 22-26%, Kantar Media's smaller size suggests a higher premium.

Looking at private equity transactions over the past decade, Deloitte reports premiums between 38-55%, aligning with a Rotterdam School of Management study of 410 transactions showing an average premium of 42.5%.

Given these data points, we can reasonably expect a premium between 35-45% for this deal, suggesting an enterprise value between $690M-$740M.

We can use another approach to verify this range. When Bain Capital acquired a 60% stake in Kantar Group in 2019, the entire group was valued at $4B.

Kantar Media historically represents about 15% of Kantar Group's value. Applying this percentage suggests a value around $600M before accounting for growth since 2019.

Using Kantar's stated growth rate of 4% annually (slightly above McKinsey's industry average of 2.8%), we can estimate Kantar Group's current value at $4.87B.

This implies a Kantar Media value of approximately $730M and a valuation multiple of approximately 6x – falling squarely within our initial range and validating our analysis.

This implies H.I.G. Capital paid an acquisition premium of 37% for Kantar Media.

Opinion & Outlook

H.I.G. Capital’s resources can help Kantar Media innovate and strengthen its position in its market. They’re likely aiming for a typical 5-7 year investment horizon and are willing to invest and improve Kantar Media’s services.

This process may involve operational improvements, cost-cutting, and strategic repositioning to increase Kantar Media’s valuationwhich can lead to talent retention risks and potential management differences if executed poorly.

Ultimately the success of this acquisition will depend on how well the companies integrate and adapt to market dynamics.

Conclusion

Private equity firms are increasingly targeting companies with scalable data and analytics solutions, recognizing their high margins, recurring revenue models, and strategic importance for various industries.

The post-pandemic advertising rebound has amplified demand for actionable insights, with Kantar Media’s capabilities aligning with this macro trend.

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The Deal Talk Team