Although this year is not supposed to be as robust on the M&A front as 2005 was, the appetite for media deals remains hearty, according to executives who spoke Tuesday at media investment bank DeSilva+Phillips' Media Dealmakers Summit 2006 in New York.
On the final day of the two-day conference, a triumvirate of senior-level media executives discussed where the media M&A market is headed and whether, after two years of torrid growth, a slowdown may be in store.
“Because of unusual financing opportunities and the dynamics of venture capital and private equity funds, this may not be a sustainable time. At some point, something has to give; but I don’t know when,” said L. Gordon Crovitz, senior VP of Dow Jones & Co., who has taken on a more strategic role at the company following recent management changes. “The issue for Dow Jones is: Can we move into adjacent markets and are there going to be revenue synergies or cost synergies?”
The panel also addressed some of the crucial differences in the marketplace between private equity players, who have been largely setting the M&A agenda, and strategic players, who for the most part have remained on the sidelines, opting for niche properties, particularly in the online and trade show sectors.
“Private equity is willing to bet on revenue synergies rather than strategic,” Crovitz said. “[But] when I look at an acquisition my reputation is at stake. I don’t have a portfolio of 13 deals. I get one shot, and I’m held accountable.”
Last year at this time, Dow Jones had just completed its $519 million acquisition of MarketWatch. Crovitz said the company, which publishes The Wall Street Journal and Barron’s, will continue to be on the lookout for additional media properties that can dovetail with existing products. “We’re in the second inning of an information revolution and companies like ours will remain very open to acquisitions.”
Alan Patricof, co-founder of private equity firm Apax Partners stressed that now is “a good time to be a seller.” He said the holding period for private equity companies that have acquired media portfolios—typically three to five years—is starting to shrink.
The panel also discussed trends in vertical search, with the specter of Google never very far from the stage.
“We’re strong fans of Google,” said Tad Smith, who was recently promoted to CEO of Reed Business Information. Like many legacy b-to-b publishers, Reed Business has a formal relationship with Google.
But Smith added that b-to-b publishers’ existing relationships with their customers may give them a leg up as search becomes more competitive.
Crovitz said: “Despite Google’s amazing success, search is not a mature industry. Publishers will find increasing opportunities to work with search companies that want to distribute more valued and more filtered search results.”