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Prognosis for 2009: Mid-market M&A will continue, despite challenges

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History tells us that economic and business cycles are inevitable and even healthy for those companies that survive. Based on our experience over the past 22 years, we expect that M&A activity will continue in 2009, albeit at a slower pace, during this recessionary period. During the last recession of 2002/2003, JEGI closed 29 transactions, many of which were distressed businesses that are thriving today under new ownership. Based on our discussions, all indications are that the players in the b-to-b media industry are keen to return to a more active M&A market sometime in 2009. Entering 2009, many strategic b-to-b media companies have cash available to invest in acquisitions, as part of their long-term strategy. However, at the same time, we expect them to continue divesting businesses that are not core elements of their long-term growth strategies. Many PE funds have equity to invest to continue enhancing their b-to-b media platforms. They may be willing to make acquisitions with 100% equity, but will do so with the intention of recapitalizing those acquisitions with debt, as soon as it becomes available. We expect that some PE platforms will also be divesting noncore assets (i.e., those not essential to the on-going business's product and service offerings), either to improve the overall business, generate capital for re-investment in core acquisitions or out of necessity. The global business community has never had more need for a solid b-to-b media industry to support it with quality information and efficient ways of bringing buyers and sellers together. The future of the b-to-b media industry is secure. However, given current financial considerations, it's clear the landscape will continue to evolve and consolidate, resulting in fewer, stronger and more marketing-oriented b-to-b media companies. Richard Mead is a managing director of The Jordan, Edmiston Group Inc. (www.jegi.com), a provider of independent investment banking services for media, information, marketing services and related technologies. He can be reached at richardm@jegi.com.
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