KKR pays $1.1bn for Internet Brands

August 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity giant KKR & Co LP has announced its entry into a definitive agreement to acquire website operator Internet Brands Inc from Hellman & Friedman and JMI Equity. The $1.1bn deal will be completed using funds from KKR’s North America XI PE fund. Although no expected completion date has been announced the transaction is still subject to customary closing conditions.

In a joint statement announcing the deal, KKR said it was acquiring the Internet Brands business in partnership with Internet Brands chief executive Bob Brisco and the Internet Brands management team, who will hold a minority stake in the company and will continue to run the business once the deal has been completed. By acquiring Internet Brands, KKR is continuing the PE ownership of the company. Fellow PE firms Hellman & Friedman and JMI Equity purchased the Internet Brands business in 2010 for $640m.

KKR hopes to help Internet Brands develop and expand its services. Currently the company, which operates a number of websites including Lawyers.com, CarsDirect and ApartmentRatings.com, generates the majority of its revenue via online advertising. The Internet Brands website receives more than 100 million visits per month, so is ideally placed to generate extensive online advertising revenues.

Despite the company’s reliance on internet advertising, Internet Brands, based in El Segundo, California, has recently begun to branch out into other areas. Of late, the company has expanded its operations into the ‘software as a service’ industry, providing companies with software to accomplish certain tasks. The firm’s Autodata Solutions business, just one of its new units, provides services to companies in the automotive trade, including Toyota Motor Corporation, Ford Motor Company and Chrysler Group LLC.

Internet Brands was founded in 1998 as CarsDirect, however the company rebranded when it began to move into other business areas. The firm manages websites across four distinct business areas including the automotive, health, legal and home and travel industries. The company was taken public in 2007 but was acquired by Hellman & Friedman and JMI Equity just three years later. In a statement announcing the deal, Mr Brisco noted his company, which has around 1600 employees, was “delighted to be partnering with KKR at this important juncture in our business, when we have dramatically expanded our client solutions portfolio and our growth in key areas is accelerating”.

The acquisition is not KKR’s first foray into the technology sector. Four years ago it purchased Visma Group Holdings, a Norwegian business which provides companies with accounting and payroll software. Although KKR did sell part of its stake in Visma earlier in 2014, it still retains an interest in the company. Furthermore, KKR has made recent investments in a number of other technology groups including domain name registration business Go Daddy, Mitchell International, Fotolia and Ipreo Holdings LLC. “Internet Brands is at an exciting inflection point of growth as the company transitions from a portfolio of web assets to a vertically integrated provider of media and client software solutions,” said Herald Chen, co-head of KKR’s technology investing team. “Its growth has been driven by its powerful, proprietary operating platform and a management team with a focused vision.”

Outside of the technology industry, KKR has completed a number of other acquisitions across a diverse group of sectors. Indeed, a number of the firm’s most recent acquisitions point to KKR’s portfolio diversification plans. In late May, KKR announced it had agreed to acquire Singapore-based Goodpack Ltd, the world’s largest maker of intermediate bulk containers, for $1.11bn.

The sale of its stake in Internet Brands at the beginning of June represented the second major asset sale for PE firm Hellman & Friedman in less than a week. On 29 May, the group also agreed to sell Sheridan Healthcare to Amsurg Corporation for around $2.35bn.

Richard Summerfield