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Full Speed Ahead

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Cam Bishop, president-CEO of Ascend Media and a 30-year veteran of b-to-b publishing, concedes that his forecast for media deals in 2006 was a bit off the mark.

"I called '06 wrong," he said. "It was a lot more gangbusters than anticipated; 2005 had been pretty aggressive for b-to-b media deals, but then in '06 you had the deals for VNU and Penton."

Bishop no doubt had plenty of company in expecting the M&A market was due for a slowdown last year. After all, it's been on a tear since 2004, a period marked by record price valuations.

Yet the market shows few signs of letting up. The main reason: Private equity players in the last few years have fundamentally altered the marketplace, which now resembles a veritable bazaar that is constantly open for business.

In 2006, private equity buyers accounted for 18.4% of the 637 media transactions tracked by media investment bank Jordan, Edmiston Group, up from 10.4% of the 460 deals in 2000. Private equity sellers represented 5.7% of the total number of transactions last year, up from 2.6% in 2000 but down from a high of 6.6% in 2003.

"Looking at '06, media companies owned by private equity had a net of 81," said Richard Mead, managing partner of Jordan, Edmiston. "Acquisitions help private equity grow their platforms faster and improve overall return on investment. You also have private equity selling [media assets] to private equity, which previously hadn't been the case."

Private equity now controls several major business media companies, including Hanley Wood, Penton Media and Nielsen Co. (formerly VNU). Private equity firm Wind Point Partners last November formed Summit Business Media with the simultaneous acquisitions of Pfingsten Publishing and Highline Media.

"We now have seven times more capital than we had previously," said Andrew Goodenough, president-CEO of Highline Media. "We have a substantial opportunity to continue our growth whereas before we couldn't do the larger deals."

Soon after it was formed, Summit acquired Judy Diamond Associates, a database provider for the insurance and financial services industries. Highline's portfolio includes National Underwriter and Wealth Manager.

"We're not a publishing company anymore but an information company," Goodenough said. "That means databases, conferences, training materials, continuing education—in person, in print and online."

In another recent example of private equity spreading its wealth into b-to-b media, GF Capital in January took a significant equity stake in Trade Services Corp., a database services provider. Technology publisher Ziff Davis Media, which has been on the block for months, is also expected to be sold to private investors.

"When [private equity firms] have a three-to-seven-year window to [flip] the business, when there are less strategic companies doing the buying and lots of assets coming to market, it's going to feel like everything is for sale," said Reed Phillips, a partner in media investment bank DeSilva & Philips.

Industry analysts said that barring any new uncertainties internationally, the media M&A market in 2007 will resemble 2006.

In addition to a steady stream of deals for online assets and trade shows, 2006 saw Prism Business Media's acquisition of Penton Media for $530 million, the biggest b-to-b media transaction since DLJ Partners' $900 million purchase of Advanstar Communications in 2000. The Prism-Penton deal was preceded by the $11.0 billion acquisition of then-VNU by Valcon Acquisition, a private equity consortium.

Combined value tops $60B

M&A activity was up overall in 2006, according to an overview released in early January by Jordan, Edmiston. The 637 transactions had a combined value of more than $60.0 billion, compared with 525 deals valued at $56.0 billion in 2005.

Still, it was a mixed bag for the 11 media and information categories tracked by Jordan, Edmiston.

B-to-b magazines deals totaled 42 last year, down from 46 in 2005; however, the value of the 2006 deals surged 140% to $6.0 billion, from $2.5 billion. Deals in the exhibition and conference sector totaled 52, up from 34 in 2005; the value declined, though, to $875 million, from $2.1 billion in 2005.

The tally of online deals increased to 181, from 117 in 2005; the value fell to $8.9 billion from $12.1 billion, perhaps a reflection of fewer pure-play online properties with enough scale to attract buyers.

"There are only so many dot.com companies to go around," said Tolman Geffs, a managing director at Jordan, Edmiston who specializes in online media. "Companies that own content, have an audience and profitable models—even if they're small—are sparking a lot of interest."

Eager to cut deals

Media executives are eager to cut deals this year, according to an online survey conducted by AdMedia Partners in December. The media investment bank took the pulse of more than 17,000 senior executives at major media companies.

According to the survey, 39% of respondents expect "strong" M&A activity in every media sector this year, while 53% expect "moderate" growth. Only 8% expect growth to be weak.

Aside from acquiring the Food Safety Summit in early 2006 and selling Pro AV to Hanley Wood, Ascend Media, which is backed by CCMP Capital, was fairly quiet on the M&A front last year. Bishop said he expects that to change this year.

"It's our intention to be considerably more active on the acquisition side," he said, adding that Ascend is eyeing print, online and education properties in the health care sector. "There's nothing concrete so far, but we have had some initial discussions and made some initial bids."

Neal Vitale, president-CEO of 1105 Media, which was created last year when Vitale, backed by private equity firms Nautic Partners and Alta Communications, bought 101communications and Stevens Publishing, said he's "emptied our current pipeline, but more deals are in the pipeline and we expect to close them in an orderly fashion."

Starting late last year and in rapid succession, 1105 Media announced deals to acquire Contingency Planning and Management Group, Post Newsweek Tech Media, Fawcette Technical Publications and Florida Educational Technology Group. All of the businesses include properties compatible with the technology, security, education, environmental and business intelligence markets that are part of 1105 Media's existing portfolio.

Vitale said he expects the pace of b-to-b media deals will continue to accelerate regardless of external factors. "At the end of the day, it's all about execution and how the asset is performing, and not about how the underlying industry is doing," he said.

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