Inevitably, the new year brings with it champagne, bowl games and year-end mergers and acquisitions reports from investment banks.
Taken as a whole, the reports released around Jan. 1 characterized last year's M&A activity in the media and marketing sector as robust in terms of the number of deals.
A report from Berkery, Noyes & Co. tabulated that the number of deals increased to 687 last year, a 27% bounce compared with 2009. However, the value of those deals tumbled to $24.0 billion last year, a 35% decline, thanks mainly to several huge deals in 2009, such as Thomson Corp.'s $17.58 billion merger with Reuters Group.
Petsky Prunier's report said M&A transactions in the marketing, information and digital media/commerce sector increased 49% last year to 1,019 transactions. In the same period, aggregate deal value rose 88% to $51.5 billion.
Jordan, Edmiston Group's report found that the number of deals increased to 845 last year, a 39% jump compared with 2009. The value of those deals increased to $43.3 billion last year, also a 39% improvement.
Jordan, Edmiston's report revealed mixed results in the b-to-b arena. The number of b-to-b online media and technology deals reached 59 last year, an increase of 11% over 2009. In the same time frame, deal value in that sector jumped 88% to $2.5 billion.
Meanwhile, the exhibitions and conferences deal market was cool last year, with the number of transactions dropping 34% to 23, and the value of these deals falling 22% to $129 million.
The number of traditional b-to-b media deals increased to 37 last year, up 85%. However, the aggregate deal value plummeted to $534 million, a drop of 85%. Much of that value came from a single deal: United Business Media's reported $287 million acquisition of Canon Communications.
When the UBM-Canon deal took place in September, some industry observers hoped it was a sign the b-to-b media market was revving up. But it's clear that small deals—often driven by debt concerns—continued to be the norm in b-to-b media.
Lebhar-Friedman Inc.'s deals at the end of 2010 are representative of the current state of the b-to-b media M&A market.
To pay off the debt it had taken on in 2005 for its $40 million acquisition of Dowden Health Media, Lebhar-Friedman was pressured by its banker, GE Capital, to sell off properties. In December, Lebhar-Friedman completed two deals, which erased its debt. It sold what remained of Dowden Health Media to private equity firm High Road Capital Partners. It also sold Nation's Restaurant News, a property Lebhar-Friedman President Roger Friedman had created in 1967, to Penton Media.
Lebhar-Friedman still owns Chain Store Age and Drug Store News, and the company plans to focus on growing the business around them. “It's like "Sophie's Choice,' ” said an industry observer. “They had to give up NRN to get GE to go away.”
One of the toughest parts of the NRN deal for Friedman was the fact that his son, Randall, would move to Penton with the property. “As much as I did not want to sell Nation's Restaurant News, it was not quite like losing a member of my family from the business,” Friedman said. “It didn't make me very happy.”
Observers believe most of the industry's debt issues have been worked out. “Going into 2011, I think there is reason for optimism,” said Mike Parker, managing director at AdMedia Partners.
“It appears that the economy is getting better. There seems to be a level of confidence that wasn't there a year ago in terms of clients making decisions to go to market. I think most of the distressed sales are over and done with.”
Parker's firm conducted a survey of executives at media and marketing companies in November that found a majority of respondents agreed that M&A activity will increase this year. For example, 78% of the executives at content companies who responded to the survey expect M&A activity to increase for strategic buyers, while 63% expect M&A activity to increase for financial buyers.
The optimism about the M&A market seemed predicated on the respondents' equally bright outlook for the economy: 97% said they expected the economy to be stronger or the same this year compared with 2010.