(Still) bullish on b-to-b media

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B-to-b media players could barely catch their breath from the dizzying pace of media mergers and acquisitions in the first half of the year when the second half kicked in with another series of high-profile deals.

In the first week of July alone, there were several major deals:

United Business Media, parent of CMP Technology, agreed to buy Commonwealth Business Media for $152 million in cash. The acquisition gives UBM a strong foothold in the international trade and transportation business intelligence markets.

Former Cygnus Publishing president Richard Reiff acquired Reed Business Information's New Products division and formed a media company called Advantage Business Media. Financial terms of the deal were not disclosed but an insider said the price was between $10 million and $20 million. The New Products division includes BioScience Technology,, Genomics & Proteomics, and Pharmaceutical Processing .

Nelnet acquired Peterson's, a provider of education and career-related products, from Thomson Corp. for approximately $40 million, according to a person familiar with the transaction.

Things have kept rolling since then, with Forbes in early August selling a minority stake for a reported $250 million to Elevation Partners, a private equity fund whose partners include Bono, the lead singer of the rock group U2.

During the first half of the year, the roll-up of b-to-b media properties continued unabated. The number of deals rose 12.5% from the first half of 2005, according to a recent report by media investment bank Jordan, Edmiston Group. The combined deal value climbed 33.5% to $37.0 billion, from almost $27.9 billion in the first half of 2005.

Far and away the biggest b-to-b media deal of the first half was the $11 billion acquisition of media conglomerate VNU, which includes VNU Business Media, by a group of six private equity firms doing business as Valcon Acquisition.

There were 19 b-to-b magazine deals in this year's first half, down from 26 in the year-earlier period, according to Jordan, Edmiston. However, the value of those deals surged 21.8% to $2.0 billion, from $1.7 billion in last year's first half.

The number of deals in the exhibitions and conference space totaled 22, up from 17 in the year-earlier period. The deal value fell 65% to $631 million, from $1.8 billion.

By another accounting, the number of trade magazine and trade show deals increased to 44 in the first half, from 23 in the first half of 2005, while the dollar value fell to $488 million from $1.3 billion, according to M&A firm Whitestone Communications.

"The landscape hasn't changed that much, except that interest rates are higher than they were 12 to 18 months ago, which may put a damper on multiples," said Tom Kemp, managing director of Veronis Suhler Stevenson and former chairman-CEO of Penton Media. He said publishers that are well-positioned in their markets and generate solid revenue--not to mention positive cash flow--will command a healthy degree of interest among buyers.

Several major b-to-b media companies are now in play, including Highline Media, Penton Media, Pfingsten Publishing and Ziff Davis Media. (After testing the M&A waters, Cygnus Business Media recently pulled itself off the market.)

Flush with capital and still-generous lending rates, private equity firms are expected to drive the big-ticket transactions in the second half, while strategic b-to-b media companies stick with acquiring niche properties they can "bolt on" to existing products and services. Media companies that lack robust online strategies may be left in the lurch.

"It surprises me that at this stage of online development there are still many b-to-b media companies that are approaching online very gingerly and not aggressively enough," Kemp said. "B-to-b marketers are definitely going online and, if traditional b-to-b media companies don't provide service or opportunities, [advertisers] are going to go to someone else and bring their dollars with them."

One-time strategic b-to-b media executives who are now bankrolled by private equity say they will be active on the M&A front in the second half.

"We're looking at all categories and have no predilections," said Neal Vitale, president-CEO of 1105 Media and former president-CEO of Variety . "We want good brands and good markets; whether it's a trade show or online is secondary."

Backed by private equity firms Nautic Partners and Alta Communications, 1105 Media earlier this year paid $75 million for IT media company 101communications and an undisclosed sum for 80-year-old Stevens Publishing, which has several products in the health and safety and security markets.

"There's still a lot of pent-up supply out there," said Charles McCurdy, CEO of b-to-b media holding company Apprise Media, who in March took on the additional role of CEO of the company's Canon Communications. In March, Apprise bought London-based Octo Media, publisher of Medical Device Technology, for an undisclosed sum; in May, it agreed to buy the U.S.-based industrial and manufacturing events portfolio and Powder/Bulk Solids from Reed Elsevier.

Opinion is divided among media bankers on whether the b-to-b media frenzy is on the verge of slowing down.

"The pace will continue, and I don't see anything on the horizon that will slow it down," said Reed Phillips, a partner in media investment bank DeSilva & Phillips, which is brokering the sale of journalism jobs Web site "We're seeing a lot of activity and some fairly significant transactions for the second half across all media categories."

Rob Garrett, managing director of media investment bank AdMedia Partners, anticipates a cooling-off period. "The appetite of private equity is beginning to get satiated," he said. "You also have higher interest rates and sellers asking for higher prices. Bolt-on deals will continue, but I would exercise extreme caution about big deals."

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