M&A activity up, but prices down

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Last year was an extraordinarily sluggish one for M&A activity in business media, but it ended with a surge of deals. Among the flurry of headline-grabbing transactions that took place in December were:
  • Bloomberg L.P.'s acquisition of BusinessWeek from McGraw-Hill Cos.
  • NewBay Media's purchase of Broadcasting & Cable, Multichannel News and This Week in Consumer Electronics from Reed Business Information-US.
  • Private equity-backed e5 Global Media's pickup of Billboard, The Hollywood Reporter and other properties from Niel- sen Business Media. B-to-b media deals continued to flow in January, including:
  • Duncan McIntosh Co.'s rescue of the iconic Editor & Publisher, which Nielsen Business Media had shuttered Dec. 31.
  • Private equity firm Seguin Partners' acquisition of CFO Publishing, in partnership with CFO's management, from The Economist Group. Economist Group will retain a minority stake in the new company, CFO Publishing.
  • Northstar Travel Media's acquisition of the Original Home Based Travel Agent Show and Conference from Real Trade Shows.

The uptick in dealmaking is giving investment bankers some cautious optimism for 2010—even in a sector that has been hit hard by the economy.

"B-to-b ad spending is settling, and buyers see an opportunity to buy at the bottom of the market,” said Scott Peters, co-president of investment bank Jordan, Edmiston Group. "Ad spending is returning, and strong brands will remain viable b-to-b media franchises. Sell-side situations will continue to be driven by restructuring and overleveraged situations.”

In a report released in January, Jordan, Edmiston tabulated 615 transactions in the media, information and marketing services sectors in 2009, with a combined value of $32 billion. The number of deals decreased 24% compared with 2008, and the combined value declined 11%.

M&A activity, however, increased significantly in the fourth quarter of 2009. Jordan, Edmiston reported there were 149 deals in the period, with a combined value of $15.4 billion, almost half of 2009's total deal value.

While the number of b-to-b media deals declined 9.1%, from 22 to 20, between 2008 and 2009, the combined value skyrocketed 753.4% to $3.6 billion. Most of the deal value, however, stemmed from a single transaction in December: EQT Partners' $3.4 billion acquisition of Springer Science+Business Media.

Without that deal—clearly an outlier, as many giant media companies, such as Nielsen and Reed Elsevier, are shedding b-to-b media properties—M&A activity in the b-to-b media sector looked anemic. Factoring out that transaction, the dollar volume of b-to-b media deals plunged 52% last year.

M&A activity in the exhibitions and conferences sector was sluggish last year—35 deals (down 30% compared with 2008), with a total value of $166 million (down 77.6%).

Jeff Dearth, partner at investment bank DeSilva & Phillips, said that while advertising-supported properties may not be in great demand, data businesses with recurring revenues are likely to be attractive to buyers. "It's kind of bifurcated,” he said.

The Jordan, Edmiston data appear to support this assertion. The sector with the largest transaction value in 2009 was database information services, with $7.1 billion, although that figure was down 20.2% compared with 2008.

Tom Kemp, CEO of Northstar Travel Media, said that while he expects some increase in M&A activity this year, he also anticipates that prices will remain depressed.

Kemp, who previously was a managing director at Veronis Suhler Stevenson, noted that large companies such as Nielsen Business Media and Reed Business Information are selling, while private equity companies are not as active as they were previously on the buying side. "There's going to be a lot of inventory right now and for the foreseeable future,” he said. "The other side of the coin is that there are relatively few buyers.”

Already one of the first b-to-b media companies to make an acquisition this year, Northstar is on the lookout for other opportunities. "What we want to do is take advantage of a weak M&A market if we can to try to find appropriate acquisitions at attractive prices,” Kemp said.

Jordan, Edmiston's Peters is optimistic about transaction activity this year for a number of reasons. "The drivers are a rebound in confidence by buyers; credit returning to the midmarket; seller tax motivation (get 15% cap gains while you still can); private equity trying not to miss the market-low buy opportunities; and large corporations seeing low organic growth using acquisitions to enhance overall growth and buy market share," he said.

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