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Private equity firm buys encoding specialist Telestream

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Video encoding company Telestream today said it has agreed to be purchased by private equity firm Thoma Bravo, an indication of just how much horsepower the online video space currently is generating.

Telestream, which counts among its customers companies like ABC, Fox News, NASCAR, the BBC, and Discovery Communications, said the sale will allow it to grow its core business and allow for market expansion and acquisition.

The deal is expected to close in the first quarter. Details of the transaction weren't released, but Telestream said it would continue to operate as an independent entity with existing management teams continuing current roles. Headquarters will remain in Nevada City, Calif.

The company, founded 13 years ago, has been profitable since 2001 and is considered one of the leaders in what has become a very busy sector.

"This acquisition recognizes Telestream's history of market leadership, double-digit growth and profitability," said Dan Castles, Telestream's co-founder and CEO. "We look forward to our next phase of growth and expansion with Thoma Bravo as we continue to play a leadership role in the digital media industry."

Peter Csathy, CEO of rival Sorenson Media, said he wasn't surprised by the deal.

"Telestream is a leader in the space," Csathy said, "and a deal like this underscores how hot and how important these companies are in the online video space. Private equity firms don't get involved in a business unless they're highly bullish on the overall market."

Jeff Malkin, president of cloud-based Encoding.com, agreed, saying his company has "private equity firms sniffing around often."

"The value of leveraging hosted video encoding providers far outweigh the cost and headache of managing video encoding infrastructure in-house," Malkin said, adding that the sale underscored the two market drivers for the encoding industry, "the explosion of broadband video and the complexity of managing video across the increasing number of devices and browsers in market."

Thoma Bravo reportedly has been looking to get into the sector for several months and has talked to other video encoding companies.

"Inlet, CDNetworks, BNI Video, now Telestream... the sector showed no signs of slowing down," said Sam Blackman, CEO of Elemental Technologies. "Private equity firms are focused on making acquisitions in markets that have the potential for dramatic growth, so this is a very positive sign for the adaptive video multiscreen space."

Cisco earlier this year acquired Inlet Technologies, and in October it bought BNI Video. Last month, Japanese telco KDDI America paid $167 million for CDNetworks.

"Thoma Bravo sees significant opportunity in the digital media market, and Telestream is well-positioned as a strong platform for increased investment in the industry," said A.J. Rohde, vice president at Thoma Bravo.

Telestream itself has made several acquisitions since 2001, adding compression specialist Popwire in 2006; live webcasting and screencasting provider Vara Software in 2008; and Anystream, a provider of automated multi-platform media publishing solutions in 2010.

For more:
- see this release

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