Health care media-ranging from magazines to conferences to continuing medical education resources-were among the most-sought-after properties for financial buyers in 2004 and continue to be hot commodities this year. According to media investment bank DeSilva & Phillips, four of the top 15 media M&A deals of last year centered on b-to-b medical properties, including the No. 1 deal, Bain Capital Partners' $450 million acquisition of M/C Communications.
"There's no doubt that health care is one of the most attractive segments right now," said Cameron Bishop, president-CEO of Ascend Media. With financial backing from J.P. Morgan & Co. and Veronis Suhler Stevenson, Ascend acquired three diverse health care properties in 2004-Medical World Communications, SynerMed Communications and Exhibitor Visibility Worldwide.
The Medical World acquisition ranked fourth among 2004 M&A deals, valued at $130 million. The other two high-ranking deals were the $58 million recapitalization of Decision Resources by Castanea Partners and Boston Ventures Management, and Alta Communications' $48 million acquisition of OnTarget Media, according to DeSilva & Phillips.
"There's so much going for the segment, from the broad array of titles, vertical niches and types of media available to its continuously record-breaking, recession-proof growth," Bishop said.
Added Joel Novak, managing partner for media investment bank Berkery Noyes & Co.: "Ad spending-especially by pharmaceutical companies-in health care continues to be higher than most other [categories]. Today, pharmaceuticals typically devote more than 10% of their revenues to advertising and marketing, a fact that certainly merits serious attention from media companies."
Bishop said Ascend will continue to actively look at adding health care properties this year. "We expect to see tremendous M&A activity in health care in 2005," he said.
The first major health care deal might be the sale of Dowden Health Media to Lebhar-Friedman. Carroll Dowden, president of Dowden Health Media, confirmed that his company is in negotiations with Lebhar-Friedman and that a deal could be finalized soon.
"The Dowden deal would be a significant, albeit curious, one," said Tom Kemp, managing director of VSS. "Strategically, Lebhar-Friedman would immediately gain traction in the traditional health care media arena and greatly diversify the markets it serves." Lebhar-Friedman, known for its presence in the retailing industry, has been involved in health care indirectly through its Drug Store News.
"The deal would seem to be a smart cultural fit, seeing as how both companies are successful, privately owned, family-controlled organizations,"Kemp said. "However, I was surprised both that Dowden was up for sale and that Lebhar-Friedman would make an acquisition-it traditionally has grown organically with new launches."
Kemp cautioned would-be buyers-financial or strategic-not to rush into health care properties with an expectation of a guaranteed payoff. "You can't assume that if you get into the medical media field you'll automatically succeed," he said. "It's a tricky sector that's heavily regulated by the government, and competition among niche titles is already fierce."