Some sectors, including education and mobile technology, show robust growth
The mergers and acquisition market for the media sector remained dismal in the first half of 2009, but Jordan, Edmiston Group sees an uptick in activity and expects deal flow to improve in the second half of the year.
“The general consensus is that we've seen the bottom, so strategic buyers are actually getting more aggressive, and private equity buyers can't sit on their hands forever—nor can venture capital buyers. We're seeing a great sense of urgency to find deals and to do deals,” Jordan, Edmiston Managing Director Scott Peters said.
According to Jordan, Edmiston's data, the media, information, marketing services and technology sectors generated 300 transactions in the first half of this year, compared with 426 during the same period last year, a decline of 29.6%. In the same period, aggregate deal value plunged to $5.4 billion from $22.5 billion, a drop of 76.0%.
The b-to-b media sector was especially anemic. Jordan, Edmiston tracked six first-half deals, down 45.5% from the first half of 2008. The combined value, $17 million, was down 95.0%.
Peters said that with so many b-to-b media companies focused on shoring up their balance sheets with lenders, it's unlikely the M&A market will see an immediate recovery.
Exhibitions and conferences posted a similarly lackluster performance in this year's first half, with the number of deals declining 28.6% to 20 and the value plunging 82.6% to $78 million. Database and information services provided something of a bright spot, with the number of deals increasing 11% to 20, even though the value fell 95.5%, heavily impacted by Reed Elsevier's $4.1 billion deal for ChoicePoint, which took place in the first half of 2008.
Jordan, Edmiston identified two key sectors where M&A activity was brisk. In the education information, technology and training sector, deal value increased 18.0%; in the mobile media and technology sector, deal value jumped 38.4%.
Additionally, Jordan, Edmiston noted that strategic buyers with strong cash positions are making or contemplating deals, while private equity funds have been sitting on the sidelines as expensive credit terms ensure their traditional business model isn't working in the current environment.
Petsky Prunier, another investment bank that recently released M&A activity data, agreed that limited credit has reduced deal flow. John Prunier, partner at the firm, said in a statement: “Venture and growth investment is the relative sweet spot in the market, but with exit horizons generally longer and lower in value than they were when many funds were raised, liquidity and terms are still not as expansive as they have been or, we believe, will be again. Similarly, with credit markets remaining tight, leveraged buyouts remain largely beyond the grasp of their private equity sponsors.”
According to Petsky Prunier data, there were 150 transactions in the marketing, information and digital media industries in the second quarter of 2009 compared with 210 in year-earlier period, a decline of 28.5%. Combined deal value fell 68% to $2.4 billion. M