Media M&A market shows signs of life

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There are signs of life in the b-to-b media mergers and acquisition market, which was dismal in the first half of 2009. Among the trickle of b-to-b media deals that have taken place or are in the offing so far in the third quarter:
  • The Economist Group acquired Congressional Quarterly from Times Publishing Co., which is owned by the nonprofit Poynter Institute and publishes the St. Petersburg Times. Additionally, Times Publishing recently announced it has placed another government-oriented publication, Governing, on the auction block.
  • Asset International, a financial information company that is backed by Austin Ventures, announced two deals in July. It acquired The Trade, a news provider for fund managers, and Strategic Insight, a research company.
  • The Financial Times announced last week that it has acquired MandateWire, a London-based provider of subscription-based information on European pensions.
  • Reed Elsevier announced this month that it has placed a portion of its Reed Business Information U.S. unit back on the market. The properties for sale include such recognized brands as Construction Equipment, Furniture Today, Interior Design, Library Journal and Publishers Weekly. Reed Elsevier signaled its willingness to divest its traditional b-to-b media properties in pieces by selling its U.K. travel publishing division in early July.

The placing of portions of RBI U.S. on the block could give deal flow a boost because the properties are not likely to sell to one big buyer in a single transaction but instead to several buyers in a number of deals.

“We expect M&A to go up from here,” said Scott Peters, managing director at Jordan, Edmiston Group.

“I think we're seeing some light at the end of the tunnel,” said Mike Parker, managing director at AdMedia Partners. “I certainly think the Reed Elsevier decision is a precursor of sorts.”

Whitestone Communications released second-quarter media M&A figures Thursday that showed some mixed signs that deal-making was having a modest comeback. In the trade magazines/trade show category, the number of deals fell to 11 in the second quarter from 19 in the year-earlier period, but the value of the deals rose to $77 million from $63 million.

Nonetheless, the same problems that caused b-to-b media deals to almost grind to a halt are still out there. The credit crisis has eased slightly; but, if the credit markets are not completely frozen, they're only just beginning to thaw. The scarcity of credit has kept private equity players, which kept the M&A market humming through most of the decade, on the sidelines for the past year.

Additionally, financial performance at most b-to-b media companies remains poor. With ad pages off an average 30% and low or at times nonexistent EBITDA, it's hard for sellers to get prices anywhere near what they might have commanded in recent years.

“It's very much a buyer's market, and anything that is going to be bought is going at a lower price than it would have a year and half ago,” Parker said.

Finally, there is a lack of confidence in the future of the traditional trade publication model, which relies on controlled circulation and is advertiser-supported. Reed Elsevier's decision to keep such paid subscription products as Reed Construction Data, while jettisoning traditional trade publications, is not exactly a vote of confidence for the controlled-circulation model.

Citing these reasons, Reed Phillips, managing partner at DeSilva & Phillips, said, “I think it's going to continue to be tough. It's largely going to be more of the same. The credit markets are loosening a little bit, but not enough to make that much of a difference.”

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