Vets size up M&A market

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Long-time publishing executives Jim Casella and Tom Kemp say dealmaking has dropped off sharply The deepening recession has brought dealmaking in the b-to-b media space almost to a standstill. That's the word from Jim Casella and Tom Kemp, veteran b-to-b media executives who launched media M&A companies of their own in the past two years. “This quarter is going to be one of the slowest we've ever seen,” said Casella, chairman-CEO of Case Interactive Media, a New York-based private equity firm he founded last year that focuses on acquiring companies with annual trailing EBITDA of $5 million to $25 million. “We haven't seen anything like this since the quarter following 9/11. Not a lot is going on.” Casella, former vice chairman of Reed Business Information, said M&A activity had slowed across all sectors of b-to-b media. He said strategic companies and private equity firms, including his own, continue to pursue deals, but he predicted these will be fewer in number and on a smaller scale than in previous years. Kemp, CEO of Oakstreet Media, a media acquisitions firm that he launched this past spring after serving as CEO of Miller Freeman and Penton Media and managing director of media investment bank Veronis Suhler Stevenson, echoed Casella's bleak assessment. “Earlier in the year we had weakness in the credit markets, but you could still find lenders for smaller deals,” he said. “But this has become a full-blown economic downturn. Trying to get anyone to make [financial] commitments or write checks is now very difficult. No one wants to buy a company on its way down and then spend the next two years trying to break even.” Kemp, whose firm focuses on lower-midmarket b-to-b media and information companies, said he had been working on “a few deals” but gave no details. He said a deal that fell through last spring had been resurrected recently after the seller acknowledged that the price it had been seeking was now unrealistically high.  “Sellers have gotten the message that their companies are now worth less,” Kemp said from his office in New Canaan, Conn. “They realize that if they want to sell, they must be more cooperative and flexible on pricing.” Case Interactive Media, which is backed by Austin Ventures, is better positioned than many media acquisition firms to make deals without taking on debt, Casella said. But even with this advantage, he said, the company has only two deals in the works, both of which he characterized as “relatively small.” Casella predicted that business conditions wouldn't improve substantially until the second half of next year. “This is not something that is going to end on the first day of the Bush-Obama transition,” he said. “The first quarter of "09 will be difficult. I hope to see a little daylight in the second.” M
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