Still on the fast track

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B-to-b online media will outpace the market growth of b-to-b magazines on a compound annual basis from 2006 through 2010, according to a recent report from media investment bank Jordan, Edmiston Group.

The report also found that while traditional media now accounts for more than 90% of the M&A market, interactive media and marketing services will account for 40% of the growth during the next four years.

The report, "M&A Outlook and Valuations," was released last month at Outsell's Signature Event, which was co-produced with Jordan, Edmiston. It examined market trends affecting M&A activity in three areas: b-to-b media, b-to-c media and marketing services.

According to the report, b-to-b online media are expected to grow 23% on a compound annual basis from 2006 through 2010, while b-to-b magazines and events are expected to grow 3%. Database and information products are expected to grow 5%.

"Some print properties are on a gentle decline, but online and events continue to grow strongly," said Wilma Jordan, CEO of Jordan, Edmiston.

It's a similar trend for marketing services. Interactive marketing services are expected to grow 35% on a compound annual basis compared with 5% for traditional marketing services. Yet traditional marketing services will still comprise 85% of the market in 2010, according to the report.

Interactive marketing services grew 91% on a compound annual basis from 2001 through 2007 compared with 19% growth for traditional marketing services, the report said. The value of interactive marketing deals this year ($15.8 billion) eclipsed that of traditional marketing services ($11.8 billion). But it's important to note that three deals accounted for $9.5 billion of the total interactive transaction value: Microsoft-aQuantive, Yahoo-Right Media and Google-DoubleClick, which is still pending.

All media and information market sectors tracked in the report grew substantially on a compound annual basis from 2001 through 2006 and continue to outpace the U.S. gross domestic product.

B-to-b media led the pack, up 6.1% (to $160 billion in market spending), followed by marketing services, up 5.4% (to $204 billion), and b-to-c media, up 3.9% (to $101 billion). GDP grew 2.9% on a compound annual basis from 2001 through 2006.

"The report reinforces that b-to-b media is a very good investing category and will continue to be one of the strong drivers in M&A," Jordan said, adding that the credit crunch and subprime mortgage crisis are not having a serious impact on the desire for b-to-b media deals.

She stressed that transaction values within the media industry remain robust. In the first nine months of this year alone, the value of M&A transactions totaled $59.5 billion, 18% greater than the total for all of 2006. "There is a lot of liquidity in the pipeline," she said.

Private equity firms have $1 trillion under management—eight times 1995 levels—with a $300 billion "overhang of uninvested capital," according to the report.

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