"You have a frothy market, but it's an educated frothy market and there's a big difference," said Peters, who joined Jordan, Edmiston in 1997. "It's not a dot-com evolution where people are throwing money at the next best thing, but people buying rational businesses with real cash flows, with arguably aggressive capital structures but with enough growth to take aggressive down to manageable in a short period."
Peters, who has brokered several major b-to-b media deals this year, including the sale of Gold Standard to Reed Elsevier and Evanta to dmg world media, doesn't see a slowdown in b-to-b media deals anytime soon, but he does expect a good deal more sanity than in the recent past. He recently talked with Media Business about trends in the M&A landscape.
MB: What's your assessment of M&A activity in the first half of 2006?
Peters: The first half of the year has been the most active M&A environment since the 2000 boom, and that's across all of the media and information sectors. One thing that really continues to push the market is the debt market. Even though interest rates are creeping up, capital is still relatively cheap. There are also several entrants into the media-lending space-nontraditional pockets-that have been very aggressive, like General Electric and Bank of Montreal. So for people looking for debt capital, there are a lot of options and a lot of very competitive companies trying to win the business. And that competition has extended the M&A cycle. Five or seven years ago, there were probably 10 to 15 private equity funds of consequence that cared about media markets. Today, there are probably 150.
MB: What are your projections for the second half of the year and early 2007?
Peters: Second half will be as good as the first half and a continuation of very aggressive M&A activity. ... There's still tons of activity in the pipeline, and lots of deals that will be announced in the next three months. Next year is a little trickier to pinpoint.
MB: How are multiples varying from one area of b-to-b media to the next?
Peters: The highest multiples are being paid for electronic/Internet-based b-to-b, which is a function of pure growth in those sectors. On average, electronic is maybe 10% of traditional b-to-b publishers' revenue, and one can argue it should be 40% to 50% of revenues. So the question is: How quickly do they get there-organic or acquisition? And a lot of companies have concluded that acceleration comes through acquisition.
MB: Do you think as the Internet continues to penetrate business markets the demand for face-to-face events will grow even more?
Peters: There's more and more money being spent on face-to-face and new forms of media that really help the engagement with the customer and seller. The big players in the space wholeheartedly agree that face-to-face is a core part of the media mix, and the Internet cannot replace that.
MB: What are the prospects for b-to-b media companies steeped in print without a robust online media strategy?
Peters: There is a firm belief in the marketplace that content is king and brands are king. This time a year ago there were people who were questioning whether b-to-b media would be left in the dust, which goes all the way back to people thinking VerticalNet would overtake b-to-b media. But it didn't work because there are brands that have great relationships with advertisers and with the trust of their readers. People a year or two ago were questioning the viability of those businesses but are now saying those brands could be the key to an electronic business and the next business model.