This year is looking like a positive one for media and marketing M&A activity, according to a number of reports released by investment banks in the first days of the new year.
“It is very positive, with a couple of little caveats,” said Seth Alpert, managing director at AdMedia Partners, which released its “2012 Mergers and Acquisitions Prospects for Media, Marketing Services and Related Technology Firms” report earlier this month.
Almost 60% of respondents to the survey, which was conducted in November, said they expect to seek an acquisition this year. That figure was up from 40% in the prior year's survey.
The 18th annual online survey was sent to 7,300 senior executives in the media and marketing industries, although AdMedia did not indicate how many responded. The survey found that 48% of respondents expect to contemplate a sale of their company or a subsidiary. That figure was up from 36% a year earlier.
But not every sector is anticipating a boom year: One of the caveats Alpert referred to is the b-to-b media sector. Almost 70% of respondents to AdMedia Partners' survey said they expected EBITDA (earnings before interest, taxes, depreciation and amortization) multiples for b-to-b media to be 6x or less. Meanwhile, 64% of respondents in social marketing expected a 7x EBITDA or greater this year.
“I would read that as saying traditional business media companies are going to be very hard to sell,” Alpert said.
Traditional b-to-b media, especially on the print side, experienced a sour year in 2011 when it came to M&A activity, according to data released by investment bank Jordan, Edmiston Group. The number of deals in the sector decreased 62%, to 14, and the aggregate deal value plummeted 91%, to $50 million.
The exhibitions and conferences category showed some resiliency as the number of deals increased 39%, to 32, and aggregate deal value increased 249%, to $451 million, according to Jordan, Edmiston. The bellwether deal in this sector was Providence Equity Partners' $180 million acquisition of George Little Management.
Chastened by high-profile deals over the past decade for media properties that eventually underwent financial restructurings, such as Veronis Suhler Stevenson's $1.1 billion acquisition of Advanstar Inc., private equity players are investing in the digital and marketing services sectors as marketers move more of their budgets into these areas. Large private equity deals for interactive companies in 2011 included Kohlberg Kravis Roberts & Co., Silver Lake Partners and Technology Crossover Ventures' $2.3 billion deal for Go Daddy Group.
Digital advertising spending is expected to rise 18% this year to $36.8 billion, according to projections from eMarketer. That figure doesn't include spending on marketers' own websites, which Outsell Inc. estimates at more than $60 billion annually. That kind of spending is a partial explanation for deals such as Oracle's $1.1 billion acquisition of Endeca Technologies, which helps marketers such as Avnet and W.W. Grainger improve the e-commerce efficiency of their websites.
Overall M&A deal value in the media, information, marketing services and technology sectors increased 9%, to $47.0 billion, in 2011, according to Jordan, Edmiston. The number of deals in these sectors rose 2%, to 896.
Marketing and interactive services was the most active category tracked by Jordan, Edmiston, with 291 deals (up 17% over 2010) and $15.1 billion in deal value (up 33%).
“Overall, the interactive markets, including b-to-b and b-to-c online media and technology, and mobile media and technology, as well as marketing and interactive services, accounted for 71% of M&A deal activity for the year and 65% of the value,” Jordan, Edmiston said in a press release.
The b-to-b online media and technology category posted a gain of 3% in the number of deals, to 63, and a 132% increase in deal value, to $6.0 billion.
Tracking deals in the marketing, media, technology and service industries, investment bank Petsky Prunier reported that the number of deals increased 187% in 2011, to 3,026, and the aggregate deal value grew 152%, to $141.6 billion. Digital media/commerce was the most active segment, with transactions reaching 1,159 and deal value totaling $44 billion.
According to Petsky Prunier, the second most active M&A segment last year was marketing technology, which saw 338 transactions valued at a combined $21.9 billion. Among the largest deals in this segment was Oracle's $1.5 billion acquisition of RightNow Technologies.
Another investment bank, Berkery, Noyes & Co., tallied the number of transactions in the media and marketing industries at 1,409 last year, an increase of 15% over 2010.
In the same time frame, the aggregate value of deals climbed 41%, to $54.12 billion, Berkery, Noyes reported in its “2011 Year End Merger and Acquisition Trend Report for the Media & Marketing Industry.”
The most active segment was marketing, which saw the number of deals increase 29%, to 428. The most active buyer was Publicis Groupe, which announced or closed 24 deals in 2011.
The media EBITDA multiple increased slightly in 2011 to 10.6x, up from 10.4x in 2010 and 7.0x in 2009.