After some suspense, Veronis Suhler Stevenson's sale last month of construction industry media company Hanley Wood to an investment group led by JPMorgan Partners showed that the b-to-b media mergers and acquisitions market remains robust.
Industry observers say that likely is good news for Gruner + Jahr and Primedia, both of which have high-stakes properties on the market.
The sale price of $650 million includes 2005 performance targets that would eventually make the EBITDA (earnings before interest, taxes, depreciation and amortization) multiple around 11 times based on 2005 EBITDA.
"That should bode well for other people who may be considering selling into this market," said David Harrington, senior VP-media origination for GE Commercial Finance, Global Media & Communications.
Mike Wood, who will retire as CEO of Hanley Wood once the deal closes but keep a seat on the board, agreed that the deal was not only good news for his company but also for b-to-b media in general. He said a buyer with the brand and financial power of JPMorgan was a strong sign of support for business media. "I'm happy because JPMorgan is a great buyer," Wood said.
DeSilva & Phillips, Credit Suisse First Boston and O'Melveny & Meyers advised JPMorgan Partners on the deal.
The length of time it took to complete the agreement, which was expected to be announced at the beginning of May, spread a vast unease throughout the industry and led to speculation that Hanley Wood was not getting its price or that the roiled bond markets were delaying the deal. Wood said that only the latter was true.
Wood said he was pleased with the trailing multiple, which he calculated at 13.8 times 2004 EBITDA.
Joel Novak, managing director of media investment bank Berkery, Noyes & Co. agreed that the price was robust. "It's a win-win for buyer and seller," he said. "It's a franchise with tremendous potential for growth."
Observers are split on how Hanley Wood plans to continue its growth-the company doubled in size since VSS bought it in 1999. Some say the company will ultimately have to diversify beyond construction; others say Hanley Wood plans eventually to make a bold move in attempting to acquire McGraw-Hill Cos.' or Reed Business Information's construction properties.
Frank Anton, who is Hanley Wood's president and will take over as CEO after the deal closes, said, "The intention in the immediate and foreseeable future is to remain entirely focused on construction." Anton said he expects Hanley Wood, which also plans to grow organically, to begin making acquisitions well before the end of the year.
Meanwhile, other deals are occupying the industry right now. After selling its consumer titles to Meredith Corp., Gruner + Jahr has placed its business titles, Fast Company and Inc., on the block. Insiders say there is great interest in the properties, although industry observers say the properties, both of which are down sharply in ad pages this year, will not draw multiples comparable to Hanley Wood's.
Meanwhile, Primedia saw EBITDA for its b-to-b unit increase last year, but its few powerful brands-Telephony, for instance-appear diminished, industry observers said. Nonetheless, the rich deal for Hanley Wood probably indicates that Primedia may get a satisfactory arrangement for its b-to-b unit.
On the negative side, investment bankers have disparaged Primedia's black book, which outlines the property to potential buyers. "The offering was exceptionally poor," griped one banker, who spoke on condition of anonymity, adding, "getting a double-digit multiple [for this property] is ridiculous."