Banking on business media

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As the business media fixated on News Corp.'s $5 billion bid to acquire Dow Jones & Co.—a three-month saga that culminated July 31 with Dow Jones agreeing to a sale—the rest of the media mergers and acquisition marketplace kept rolling along.

Among the deals announced soon after the first half closed:

  • Reed Elsevier, parent company of Reed Business Information, announced a definitive agreement to sell its Harcourt U.S. School Education business to Houghton Mifflin Riverdeep Group for $4 billion. Reed moved to sell Harcourt in order to sharpen the focus on its science and medical, legal and business units.
  • Jupitermedia Corp. acquired for $20 million in cash and up to an additional $3 million within two years. Mediabistro provides job postings, educational courses, events and forums for media professionals, as well as original content about the industry.
  • Yellow Pages provider R.H. Donnelley Corp. agreed to buy for $345 million in cash. The deal includes and the Advertising Network.

The late flurry of deals followed some blockbusters from earlier in the first half.

Thomson Corp. agreed to buy London-based Reuters Group for $17.2 billion, and Veronis Suhler Stevenson acquired Advanstar Communications for $1.1 billion.

The activity continued into the second half, with Ziff Davis Media essentially exiting b-to-b media with the sale of the assets of its Enterprise Group to private equity firm Insight Venture Partners for about $150 million.

The total number of deals in the first half rose 12.4% compared with the same period in 2006, according to a report from media investment bank Jordan, Edmiston Group. For the 11 media sectors tracked by Jordan, Edmiston, the combined deal value rose 77% to $76 billion, from $43 billion in the year-earlier period.

There were 24 b-to-b magazine deals in the first half of this year, up from 21 in the year-earlier period. The value of those deals jumped to $2.3 billion from $2 billion.

The number of deals in the exhibition and conference sector totaled 38, up from 26 in the first half of 2006. However, the deal value fell 20% to $515 million, from $642 million.

The biggest number of deals was for online media properties. In the first half of this year there were 120 deals in the space, up 19% from 101. The deal value grew to $4.2 billion from $4 billion in the year-earlier period.

Activity may not be so robust in the second half, however, as the credit crunch in capital markets may put the brakes on some media deals.

"The consensus among banks is that the larger deals may deserve to be cut back, but any deal under $200 million is not threatened," said Richard Mead, a managing director at Jordan, Edmiston.

Mead added that he doesn't expect the softening in the credit markets to scare off too many media buyers because it plays to their advantage in terms of paying lower multiples on price. If anything, sellers will have to steel themselves against possibly lower prices, he said. "Buyers can pay less, but there are always enough buyers who, if they really want the business, will pay a fair price," he said.

Kerry Gumas, president-CEO of Questex Media Group, said: "You have to look at the credit squeeze realistically. Certainly it's a factor. But market cycles rise and fall, so the question becomes: Is your view short-term or long-term?"

In recent months, Questex has acquired Five Star Alliance, an online luxury hotel booking service, and Oxford Publishing, producer of The Show, one of the largest food and beverage events in North America. Financial terms of the deals were not disclosed.

Neal Vitale, president-CEO of 1105 Media, which has made a string of acquisitions this year, including Contingency Planning Management Group and Fawcett Technical Publications, said he still has several deals in the pipeline despite the weakening in credit markets.

"Highly leveraged deals are going to be the ones in question," Vitale said. "We're very focused on a number of transactions that are aligned with areas in which we already have substantial business. We want to fill in the gaps in a logical fashion."

B-to-b media portfolios to keep an eye on this half include Ascend Media's Stagnito food and beverage division, Access Intelligence and Cygnus Business Media, all of which have been rumored to be looking for a buyer.

"Strategic buyers have re-emerged and are willing to do add-on deals," said Reed Phillips, a managing partner at media investment bank DeSilva & Phillips. "But the jury is still out on how aggressive they'll be with larger deals."

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