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M&A uptick in Q4 fuels optimism for new year

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Merger and acquisition activity in the media and marketing sectors was slow for most of 2009, but a surge at the end of the year is giving investment bankers optimism for 2010—even in the b-to-b media sector, which has been especially hard-hit by the economy.

“B-to-b ad spending is settling, and buyers see an opportunity to buy at the bottom of the market,” said Scott Peters, managing director at Jordan, Edmiston Group, a New York-based investment bank. “Ad spending is returning, and strong brands will remain viable b-to-b media franchises. Sell-side situations will continue to be driven by restructuring and overleveraged situations.”

In a report released Monday, Jordan, Edmiston tabulated 615 transactions in the media, information and marketing services sectors in 2009 with a combined value of $32 billion. The number of transactions decreased 24% compared with 2008 and the value declined 11%.

However, M&A activity increased significantly in the fourth quarter of 2009. Jordan, Edmiston noted there were 149 fourth-quarter deals with a combined value of $15.4 billion, almost half of 2009’s total deal value.

While the number of b-to-b media deals declined from 22 to 20 between 2008 and 2009, the combined value skyrocketed 753.4% to $3.6 billion, from $417 million. Most of the deal value stemmed from a single transaction, EQT Partners’ $3.4 billion acquisition of Springer Science+Business Media by in December.

M&A activity in exhibitions and conferences was less robust, with 35 total transactions (down 30% from 2008) and a total value of $166 million (down 77.6%).

Nonetheless, the rising fourth-quarter deal flow across media and marketing in general madePeters optimistic about transaction activity this year for a number of reasons. “The drivers are a rebound in confidence by buyers; credit returning to the midmarket; seller tax motivation (get 15% cap gains while you still can); private equity trying not to miss the market-low buy opportunities; and large corporations seeing low organic growth, so using acquisitions to enhance overall growth and buy market share,” he said.

The largest number of 2009 deals (152) took place in the marketing and interactive services sector, although that number was down 40.9% from 2008. The sector with the largest transaction value in 2009 was database information services ($7.1 billion), although that figure was down 20.2% compared with 2008.

Tracking the advertising, marketing, information and media sectors, another New York-based investment bank, Petsky Prunier, also released a report last week that noted a significant uptick in transactions in the fourth quarter, especially involving private equity firms. Private equity funds announced 20 transactions, with an aggregate value of $7.7 billion, in the fourth quarter, compared with 19 transactions valued at a combined $1.2 billion for the first three quarters of the year.

“While investment activity trended up, mergers and acquisitions on the part of corporations remained relatively strong. Valuations for publicly traded companies currently are, on average, higher than at any point in 2009. Coupled with a desire on the part of chief executives to refocus on growth, we expect to see higher levels of mergers and acquisitions and investment activity continue into 2010,” John Prunier, partner at Petsky Prunier, said in a statement.

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