Ascend Media is not in an enviable position.
It is one of the rare b-to-b media companies on the block these days, and that, industry observers say, is not a good thing. The Overland Park, Kan.-based company, which publishes Hearing Review and Orthodontic Products, has retained media investment bank Berkery, Noyes & Co. to handle the sale.
Not many b-to-b media companies are being offered for sale in the current climate. Just six b-to-b media deals took place in the second quarter of this year, a remarkably small number.
Because EBITDA multiples are depressed, this is a difficult time to get a fair price even for a company that is a solid performer, and some industry observers say Ascend is not a solid performer.
After a sale of its health care division to three separate buyers in late 2007 and early 2008, ownership of Ascend has recently reverted to its lenders, led by Wells Fargo. Industry observers say Ascend's former private equity owners, CCMP Capital and Veronis Suhler Stevenson, no longer hold stakes in the company.
Wells Fargo appears uninterested in running what remains of Ascend and has placed the company on the block. Privately, media investment banks are not bullish on Ascend's chances of finding a favorable deal.
“Who's going to buy Ascend?” asked one banker who spoke on condition of anonymity. “I think that's an unanswerable question right now. There's not a lot of appetite in the case of buyers to buy distressed properties. Then obviously you overlay that with the continued uncertainty in the economy.”
If Ascend is sold, industry observers speculate that it may not go as a single entity but in pieces to several buyers. “They're going to have a really tough time getting a decent valuation for it,” said a second media banker, who requested anonymity. “There are going to be very few buyers for that asset—if they even get the deal done.”
Ascend is not the only b-to-b media company that has reverted to its lenders. Cygnus Business Media, publisher of Firehouse, is currently putting the finishing touches on an agreement that will transfer ownership to its lenders, led by GE Commercial. The lenders are reportedly working on an agreement that would put in place a management team led by former Penton Media CEO John French, and it is assumed that GE Commercial is trying to avoid selling Cygnus until market conditions are more favorable.
Doomsayers argue that Cygnus and Ascend presage the fate of other b-to-b media companies, many of which are heavily leveraged in the current difficult economic climate. They say that any b-to-b media company acquired in the past few years in a heavily leveraged deal—which includes such respected companies as Hanley Wood, Randall-Reilly Publishing and Advanstar Communications—is in danger of reverting to its lenders.
But most industry observers believe the majority of these businesses won't eventually be owned by their lenders simply because the banks are reluctant to operate b-to-b media companies. The banks will work out new financing terms with the owners rather than operate or sell the properties, they said.
The reason Ascend and Cygnus now find themselves owned by their respective lenders is that the properties were struggling even before the deep recession struck. “Ascend and Cygnus are more or less anomalies,” according to another media banker, who spoke on condition of anonymity. M