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Third-quarter M&A results mixed as macroeconomic woes take toll

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The M&A market in media and marketing remains reasonably healthy, but various macroeconomic maladies have helped prevent it from being as robust as it might be. That's the basic conclusion of three reports issued by investment banks this month. Some observers say the market may have been even stronger were it not for the debt issues in Europe and the debt-ceiling negotiations in Washington, D.C., in the third quarter. “I think the shenanigans [in Washington] clearly delayed transactions because of the uncertainty,” said Richard Mead, managing director of investment bank Jordan, Edmiston Group. The number of deals in the media, information, marketing and technology sectors dropped to 210 in the third quarter, a decrease of 12.5% compared with the second quarter, according to figures released by Jordan, Edmiston. Meanwhile, the value of deals tracked by Jordan, Edmiston rose 6.2% to $12.0 billion. Berkery, Noyes & Co. also offered a mixed view of the M&A market. The firm said the number of deals it tracked in the third quarter increased to 348, a bump of 14% over the second quarter. In the same time frame, however, transaction value slid 23% to $10.4 billion. Petsky Prunier—which tracks deals in the digital advertising, agency/consulting, marketing technology, digital media/commerce, software and information, and marketing services sectors—had a different take. The firm said the number of deals it tracked increased 4% to 771 in the third quarter, compared with the second quarter. In the same time frame, the value of the deals increased 9% to $43.4 billion. Like the overall M&A market, the b-to-b sector was mixed. The paid-content sector, however, was strong as evidenced by Bloomberg's $963 million deal for BNA, and Reed Elsevier's $532 million acquisition of Accuity Holdings. But the traditional areas of b-to-b were quiet. The number of b-to-b media deals dropped to three in the third quarter from four in the second quarter, according to Jordan, Edmiston figures. The value of those deals increased 87.5% to $15 million, which is easily the lowest figure in any category tracked by Jordan, Edmiston. The exhibitions and conferences sector showed more life. The number of deals dropped to four in the third quarter from five in the second, but the combined deal value rose 57.3% to $206 million, driven largely by Providence Equity Partners' $173 million acquisition of George Little Management. The marketing and interactive services category was very active compared with traditional b-to-b sectors, with 92 deals in the third quarter, up 33.3% over the second quarter. Deal value dropped 19.7%, but still totaled a robust $3.0 billion. “Deal flow is being driven by acquisitions of companies in emerging growth markets, including online media and technology, marketing and interactive services, and mobile media and technology, which are up 7% in number of deals announced in 2011 year-to-date versus the first three quarters of 2010,” Jordan, Edmiston's Mead said. “This activity helped to offset the 16% year-over-year decline in M&A activity for traditional media sectors.” Evan Klein, managing director of Berkery, Noyes, said strategic buyers are driving most of the M&A market because they are “flush with cash.” But he also pointed out that private equity buyers, who had been burned by high-profile bankruptcies in the b-to-b media sector, are making a return. Overall, private equity deals represented 12% of the total deal flow and 24% of the aggregate value of M&A activity in the first nine months of this year, according to Berkery Noyes. If the economy holds, investment banks see a strong deal flow continuing into next year. “I think it will be business as usual,” Klein said. “We expect 2012 to be very active from an M&A perspective,” Mead said.
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