BtoB

'Sense of reality' comes to prospective sellers

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Richard Mead is managing director at media investment bank Jordan, Edmiston Group. The company produces a media and information transaction database that found that b-to-b magazine deals jumped 26% from 31 to 39 between 2003 and 2004, and that the value of those deals vaulted 238% to $1.827 billion in the same time frame. Media Business asked Mead about last year's M&A results and what he expects going forward this year.

MB: How would you characterize 2004 in terms of M&A activity?

Mead: It was a year that was sort of a coming to the end of tidying up and to the end of distressed properties being sold. They are what Wilma [Jordan, the CEO of Jordan, Edmiston], refers to as the three D's of M&A during a recession: death, divorce and debt. In 2004, it was also a year of [strategic buyers] beginning to wake up and private equity [investors] continuing their push into making acquisitions. 2004 was a transition year.

MB: What do you expect in 2005?

Mead: We will see some remaining tidying up, and that will continue for the first six months or so. Just looking at what we have in-house in terms of business, we can see that for the first time in some time, P&L numbers are heading in the right direction. Companies are profitable and growing.

MB: It seems that what changed in 2004 was that b-to-b media companies started to make money again and were finally able to lure acceptable bids. Is the M&A market's recovery as simple as that?

Mead: I think it is as simple as that. Also, there is a greater sense of reality among b-to-b magazine sellers in terms of what they hope to get and what they are likely to get for their properties. The dot-com windfall that was there in 1999-2000, we have to throw that out as a nonrecurring, one-time bonanza. I think people have a more realistic view of what value they can get for their business.

MB: What do you make of the assertion that b-to-b is dying?

Mead: I don't think b-to-b has ever been dead. That's an overstatement, and the troubles that some companies have had over the last few years have been of a financial nature rather than anything to do with the fundamentals of the b-to-b market itself. Would Penton have had the trouble it had if it had no debt on its balance sheet? No. There is still a need for advertising. There is still a need for media that enable buyers and sellers to come together in an efficient manner. Now, will magazines evolve? They're going to have to, because they're going to lose advertising dollars to the Internet and they're going to lose them to paid search engines. But the magazines still have very strong relationships with their industry, more so than search engines have currently. They need to get on with leveraging those relationships and deliver what the industry wants in the way of information, and by information I mean editorial content as opposed to data.

MB: What things could derail 2005 as a strong M&A year?

Mead: The only thing that is going to derail 2005 is if there is some major terrorist attack on U.S. soil that could potentially disrupt business. Other than that, it really looks like a very strong year. -Sean Callahan

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