DO: Sellers need to build up data/subscription businesses and/or social networking sources of revenue to enhance valuations.
DON'T: Companies shouldn't sell if they have had weakened financial results this year and can afford to wait until their business is back on an upward track.
President, Whitestone Communications
Baran Rosen, president of media investment bank Whitestone Communications, compares the current condition of the media M&A market to a hospital patient.
“He is out of the intensive care unit and is walking around a bit, but is still hooked up to the IV bag,” Rosen said. “The pain appears to be subsiding.”
Rosen said he has started to see interest pick up significantly among media buyers looking to make a deal. “The contagion from the stock market has given buyers a new confi-dence,” he said. “They're interested in Internet/data/ content-driven businesses and less so in print.”
The downside, Rosen said, is that companies remain skittish about selling during the recession and not getting the price they might command once the economy recovers.
“There's a lag time going on,” Rosen said. “Sellers need to have better P&Ls to show buyers multiples that will yield a valuation that works for the seller.”
Another obstacle is the lack of credit, which is particularly problematic for private equity players with a stake in b-to-b media.
“The market is still waiting for lending to kick in,” Rosen said. “The private equity companies are still strapped for bank lending for deals, and, until [credit] improves, things will be tempered. When lending comes back, that'll open the floodgates.” —M.S.