The mergers and acquisitions market in b-to-b media is scalding hot.
And it may only get hotter. As David VanderLugt, director-media & communications finance at Goldman Sachs Specialty Lending Group, noted earlier this year, “Deals lead to more deals.”
And there have been plenty of deals. In the first half of the year, the dollar value of b-to-b magazine deals jumped 58.1% to $1.7 billion, from $1.1 billion in the year-earlier period, according to the Jordan, Edmiston Group transaction database. The big b-to-b media deals in the first half included Veronis Suhler Stevenson’s $200 million sale of Canon Communications to Apprise Media, a firm backed by Spectrum Equity Investors and led by Chairman-CEO Charles McCurdy. The statistics for the first half don’t include some of the blockbuster deals that closed or were expected to close after June 30, including the $650 million Hanley Wood deal and the $385 million deal for Primedia’s business information unit.
Additionally, Credit Suisse First Boston’s auction of Advanstar-which, when and if it is completed, should easily eclipse the price paid for Hanley Wood-is not included.
Given the deals still not tabulated or still on the table, it’s easy to understand the optimism of media investment bankers. Perhaps more important, the private equity firms that have completed deals so far this year are by no means done acquiring, according to industry observers. These firms bought these platform companies to bolt on more acquisitions.
“Their plans are to grow even larger,” said one banker who spoke on condition of anonymity.
“I do believe there are some nice middle market companies coming on the market,” said another banker who also spoke on condition of anonymity.
The private equity funds that have made purchases this year are now expected to begin adding to the properties they acquired. JPMorgan Partners, for instance, is expected to begin bulking up Hanley Wood, although there is debate in the industry as to how the company will do it: by adding new-construction properties or by venturing into new markets.
Apprise Media, owner of Canon Communications, is expected to add to that portfolio as well.
Observers also expect Wasserstein & Co.’s PBI Media Partners, which acquired Primedia’s business information unit, to expand that portfolio-with an emphasis on strong editorial properties.
Observers expect the larger “strategic” media companies-VNU’s VNU Business Media and Reed Elsevier’s Reed Business Information, in particular-to be active on the sell side, divesting selected properties now that EBITDA numbers are strong.
But as in all economic cycles, the current run is almost certain to be ephemeral. “It’s just not sustainable,” said a banker speaking on condition of anonymity.