Private-equity, media go on interactive binge

By Published on .

Most Popular
Private-equity firms and big media are pouring dollars into the interactive sector as if it were 1997 all over again.

The value of mergers and acquisitions in the interactive space more than doubled in the first half of 2005 compared to the same period last year, up from $2.8 billion to $7.8 billion, per media investment bank the Jordan Edmiston Group.

"The world is awash in money," said Mark Edmiston, managing director at AdMedia Partners, a media-investment-advisory firm. "Alternative investments have become more attractive. There's a trillion dollars out there, classical private-equity money and then all the strategic guys looking now that the smoke is clearing. "

The companies to watch, he said, are those looking to merge technology and content, such as News Corp., Gannett Co. and E.W. Scripps Co.: "Rupert Murdoch has a vision and he's still executing."

`CASH MACHINES

News Corp. added 45 million unique users a month to its Web traffic following the purchase of Intermix Media for $580 million in July. Intermix operates Myspace.com, a social-networking site. Gannett meanwhile bought rich-media company PointRoll in June for $100 million, while Scripps shelled out $525 million on Shopzilla.com.

"A lot of interactive companies are cash machines the way cable has been," said Tolman Geffs, managing director with Jordan Edmiston Group. "We're handling a lot of sales, and private-equity firms are in the hunt for any profitable media companies."

Mr. Geffs cited a spate of recent deals, including the July acquisition of technology-job board Dice.com by two private-equity firms, the media-oriented Quadrangle Group, led by Steve Rattner, and General Atlantic. Larry Weber, Internet-marketing entrepreneur and author of the coming book "The Morphing of Marketing," said plenty of online-advertising sites are attracting attention, including RSS provider Newsgator.com, contextual-ad provider When You.com, and online consumer-behavior-research firm Compete.com.

Companies such as Carat and WPP Group are also known to be scouting for acquisitions, in some cases before they've even attracted venture capital.

"Big media and marketing companies have an imperative to grow. They've taken cost cutting as far as they can go," Mr. Geffs said. "The Internet is creating a profit hole and the growth is in interactive business."

Big idea

Cutting costs no longer cuts it. "Growth is in the interactive business," said Jordan Edmiston’s Tolman Geffs.

In this article: