Deals involving private equity buyers are taking longer to get wrapped up
The crisis in the credit markets is definitely affecting b-to-b media mergers and acquisitions activity, media analysts say.
“We're taking it on a day-by-day basis,” said Reed Phillips, managing partner of media investment bank DeSilva & Phillips. “It is particularly a factor in deals involving private equity buyers. It's a little less of an issue with strategic buyers, but I think the combination of the credit crunch and the economic recession is worrisome for both strategic and private equity buyers.”
Phillips said his firm is optimistic that deals will continue to be made, noting that they are simply taking longer to be completed because of the turmoil in the credit markets. He said smaller deals, in particular, are continuing to get done.
“I can't say we've seen the full impact [of the credit crisis] yet, but over the next few months we might, and it may become easier to complete deals than right now,” Phillips said.
In an overview of third-quarter media M&A activity, Jordan, Edmiston Group stated that although overall transactions have slowed due to the combined factors of market uncertainty and reduction in advertising spending, small and midsize transactions have kept a steady pace, particularly in the Online Media & Technology and Marketing and Interactive Services categories.
In a separate report, investment bank Petsky Prunier said the number of third-quarter deals in the marketing, advertising and digital media industries declined 29% from the year-earlier period, to 168, with a combined value of $11.1 billion. The dollar volume was up 30% compared with the third quarter of 2007.
Petsky Prunier described the market in the marketing, advertising and digital media sector as “surprisingly resilient,” although the firm acknowledged that the market grew softer in September as the credit crisis intensified.
“There's a perceptible loosening of credit at this moment,” said John Prunier, managing director of Petsky Prunier. “We remain hopeful and confident that opportunities for leveraged M&A transactions will be more robust, perhaps beginning in the first quarter of 2009.”
Tom O'Connor, managing director of Berkery Noyes, also expects credit to loosen up after the start of the new year.
“What you want to do is look at unique niches that are growing at double-digit rates in attractive macro sectors, and the deal will still get done,” he said.
Regarding smaller publishers looking to sell, O'Connor offered simple advice: Plan ahead.
“The deals don't happen on a dime, so in the near term you want a seasoned adviser that really understands your space,” he said. “In this kind of market, you want to know who the buyers are and how to manage that process. You need good advice.” M