The b-to-b media mergers and acquisitions market is sizzling, and Advanstar Communications appears to be the latest company looking to take advantage of it. The Credit Suisse First Boston private equity fund that owns Advanstar has placed the company on the block, according to a story in Sunday’s New York Post.
Asked about the Post report, an Advanstar spokesman said, "We do not respond to market rumors."
CSFB sold Advanstar’s technology and travel units for $185 million in May to Questex Media Group.
"2005 has been the best M&A market for magazines/events in more than a decade," said Roland DeSilva, managing partner of media investment bank DeSilva & Phillips, which calculated that the value of media and information industry transactions surged 290% in the first half, to $2.76 billion from $707 million in last year’s first half.
Said to be interested is Robert Krakoff, who is the former chairman-CEO of Advanstar and whose Blantyre Partners is backed by the Blackstone Group. Also reportedly interested are Apprise Media, backed by Spectrum Equity Partners; ABRY Partners and Warburg Pincus, according to the Post.
"On the one hand, it’s surprising that they haven’t refocused their energy on building on the rest of the portfolio," said Richard Mead, managing director at media investment bank Jordan, Edmiston Group. "On the other hand, it is a very strong market at the moment, and it makes sense to explore the market at this stage."
DLJ Merchant Partners, the predecessor of the CSFB fund, acquired Advanstar for $900 million in 2000. It is unclear how the remaining piece of Advanstar, which is run by CEO Joe Loggia, will be valued. Estimates place the EBITDA (earnings before interest, taxes, depreciation and amortization) for the Questex assets at $18 million for 2004. That would mean that the remaining piece of Advanstar, which includes the MAGIC fashion industry trade shows, generated EBITDA of about $73.5 million in 2004, which could fetch $735 million in a deal that would value the company at a 10-times EBITDA multiple.
If Advanstar were to be sold, it will likely be to a private equity fund, industry observers say. If so, Advanstar has made the rounds of private equity funds, starting with Goldman Sachs in 1992 and moving to Hellman & Friedman in 1995 and CSFB in 2000.
Another banker said the move indicated a change of plans for CSFB. "I think they are losing patience and confidence regarding the IPO option," said Robert Crosland, managing director at media investment bank AdMedia Partners.
In addition to the Advanstar-Questex deal, the second quarter of 2005 saw the closing of several b-to-b media transactions:
nA consortium led by JPMorgan Partners acquired Hanley Wood from Veronis Suhler Stevenson for $650 million.
nMansueto Ventures acquired Inc. and Fast Company from Gruner+Jahr for $35 million.
nAspire Media, backed by Spectrum Equity Partners, acquired Canon Communications from VSS for $200 million.
nWicks Medical Information, which is affiliated with the Wicks Group of Cos., acquired Jobson Publishing for $105 million from Boston Ventures.
A handful of media investment banks have released figures in the past week quantifying the vigor of the b-to-b media M&A market, which is said to be driven by renewed strength in b-to-b marketing, the continued involvement in the sector of private equity money and historically high leverage multiples.
In the first half of the year, 266 deals were completed, an increase of 15.2% over the same period in 2004, according to a report by Jordan, Edmiston Group. The value of the deals skyrocketed, climbing 181.1% to $26.7 billion.
The number of b-to-b magazine deals increased by 44.4% in the in the first half of 2005 to 26; the value of these deals climbed 58.1% to $1.7 billion.
M&A activity in exhibitions and conferences showed similar robust growth, as the number of deals increased 36.4% to 15 and the value increased 256.5% to $1.8 billion.
"The current M&A market is very competitive, as companies seek strategic and add-on growth, and private equity firms actively pursue new investments," the Jordan, Edmiston report said. "Additionally, lenders are willing to provide leverage for media and information M&A deals at historically high levels."
The value of publishing, information and training industry deals in the second quarter of 2005 totaled $10.8 billion, nearly three and half times the $3.2 billion logged in the second quarter of 2004, according to M&A advisory firm Whitestone Communications. "It was a spectacular quarter of M&A activity," said Whitestone President Baran Rosen.
"Major deals were done in all sectors—magazines, training, education, business, the Internet."
The number of trade publication/trade show deals in the second quarter of 2005 swelled to 13, an 86% increase compared with the second quarter of 2004, when there were seven, according to Whitestone Communications. The value of these deals grew by an astonishing 2,438%, increasing from $49 million in the second quarter of 2004 to $1.2 billion in the second quarter of 2005.
"A number of sellers who had been waiting for good prices to sell finally found the market conditions perfect and went to the auction block," said Sharon Sevrens, Whitestone Communications managing director.