Bullish outlook for deals

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Last month, AdMedia Partners published the results of its annual survey of M&A expectations, and for the first time since the recession, respondents were overwhelmingly optimistic about prospects for the current year and beyond.

The New York-based media investment bank polled nearly 800 senior executives at leading media and financial organizations. Roughly 92% said they will be looking for acquisition opportunities in 2005; 56% said they expect to complete a transaction this year.

Robert Crosland, managing director of AdMedia Partners, put these statistics into context: "After four ragged years, it's business back to usual. And as we've seen so far in 2005, there's a lot more agreement in valuation between buyers and sellers, multiples are up significantly and banks have loosened up their lending practices."

Sixty-nine percent of respondents indicated they believe strategic buyers' activities will increase, and 65% said financial buyers' acquisitions will step up. Additionally, 73% said strategic buyers will raise media property valuations, and 74% said the same of financial buyers. However, only 36% of respondents said there are enough healthy media targets worth acquiring.

Respondents in every media sector said they expect at least moderate-to-strong M&A activity this year. Notably, 46% predicted that b-to-b publishing M&A activity would be strong this year.

"Few expect the level of activity there was before the recession, but it's at least as healthy as the mid-1990s," Crosland said.

Multiples for b-to-b media media property valuations are expected to post significant increases, according to the study. The expected multiple for b-to-b publications jumped from the five-to-eight-times EBITDA range last year to six to nine times in 2005. Interactive media multiples increased the most, from seven to 10 times EBITDA in 2004 to 10 to 12 times this year.

"Every sector saw major EBITDA multiple increases, except for broadcast, which remained flat," Crosland said. "Interactive properties have rebounded from the dot-com bubble burst and, because they are successfully becoming major sources of revenue, they are extremely attractive to both financial and strategic buyers." 

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