While the number of deals in the first quarter fell to 244, down 4% from the year-earlier period, the aggregate value increased 16% to $12 billion, according to a report by media investment bank Jordan, Edmiston Group.
The b-to-b online media and technology sector is fueling the market, with the value of deals growing to $2.8 billion in the first quarter, from $462 million in the year-earlier period. However, the number of deals fell to 23, from 38 in last year's first quarter.
“There are strategic companies sitting on a tremendous amount of cash that they are looking to put to work,” said Adam Gross, chief marketing officer at Jordan, Edmiston. “Traditional media companies are looking to make transformative deals to continue to retool their models.”
Interactive markets accounted for seven of the 10 largest deals in the first quarter, including the only multibillion-dollar deal—eBay's acquisition of GSI Commerce for $2.4 billion.
“We're seeing larger deals in the interactive markets, and the average deal size has increased,” Gross said. “We do see that trend continuing, as companies in these markets grow and become larger, more mature businesses.”
B-to-b media M&A activity in the first quarter was essentially “nonexistent,” according to Jordan, Edmiston, with the number of deals falling 69% to four, and the aggregate value tumbling 78% to $15 million.
One reason for the downturn in traditional b-to-b media deals: Private equity players, who were quite active in b-to-b media in the last decade, are now moving into the interactive arena.
“Private equity firms that have traditionally invested in b-to-b are now investing in other markets with higher growth rates; this is evident by the amount of activity happening in the interactive markets, which accounted for 75% of deal activity in Q1 of 2011,” Gross said.
The exhibitions and conferences sector was also soft in the first quarter, with the number of transactions falling 14% to six and the value dropping 2% to $34 million, Jordan, Edmiston said.
A separate report from media investment bank Petsky Prunier said M&A activity in the first quarter rose to $24.4 billion, a 200% increase compared with the same period in 2010. The number of deals grew to 626, from 201, Petsky Prunier said.
The report examined M&A activity in the marketing, information and digital media/commerce sectors, a broader area than in Jordan, Edmiston's report.
According to Petsky Prunier, digital media/commerce was the most active and highest value M&A segment in the first quarter, with 119 transactions worth a combined $7.1 billion.
“The sweet spot tends to be deals in the $20 million-to-$250 million range; but in the marketing information and digital [markets], we're starting to see multibillion transactions come back,” said Norm Colbert, partner and managing director of Petsky Prunier. He added that buyers are eyeing “interactive, digital or, at a minimum, multichannel properties.”