"The current pace is certainly very robust, and there is every indication that it will continue," says Robert Garrett, president of AdMedia Partners.
"We are seeing in the marketplace amounts of money that are staggering," he adds. "The unspent private equity pools that have been collected to spend in this arena means there is a huge amount of money available. Banks are actively soliciting loans as well so that makes for a lot of buying activity."
Wilma Jordan, Jordan Edmiston Group CEO, predicts '98 will outpace '97 in number of transactions.
"The amount of activity is much greater in '98 than in '97," she says. "We've had 12 closings [of deals] year to date, and we expect to finish the year with between 30 and 40 transactions," noting that in '97 her company handled 21 transactions. "We should see this pace continue well into '99. This is as bullish a market as we've seen in some time."
A forward-looking annual survey conducted by AdMedia Partners of nearly 1,000 senior executives at media and financial organizations found the majority (86%) believe the level of mergers and acquisitions will increase or keep pace with 1997 levels.
One respondent commented, "There were some large deals in 1997, which probably will not be repeated, but I expect a higher number of smaller deals. The attractive prices paid in 1997 should stimulate sellers to take action in 1998."
The number of executives urging buyers to act now was up significantly from the year before. Last year's survey had the majority of respondents counseling sellers to act, but this year's survey found that most believe the time is right for action for both buyers and sellers.
"The last couple of years recommended that buyers hold back and that sellers should take advantage of the market. But this year with more good merchandise becoming available, the mood is that buyers better buy these properties while they are available because they might not come up again anytime soon," says Mr. Garrett.
Driving properties to the market are larger publishing companies looking to weed out properties that no longer fit with core strategies, such as Primedia's sale of New Woman to Rodale Press, and entrepreneurs recognizing a ripe market to sell, such as Colorado-based Sports & Fitness Publishing selling its properties to Conde Nast Publications and Petersen Publishing.
MORE KEEPING AN EYE OUT
According to AdMedia, 93% of those surveyed said they would be keeping an eye out for a suitable acquisition, while 64% expect to complete an acquisition. Thirteen percent will contemplate the sale of a company, while 19% are considering selling a subsidiary.
The number of transactions in the 12-month period from April 1997 to April 1998, according to a report by consultancy DeSilva & Phillips, was up over the previous year: 97 transactions valued at a combined $2.55 billion for April '97 to April '98 compared with the 89 transactions valued at $1.52 billion that occurred in the same previous period.
A trend gaining strength is the number of financial buyers out looking for media properties.
"This is a phenomenon of the last two or three years, where financially backed buyers have come in with the resources to outbid strategic buyers," says Mr. Garrett, citing deals such as the investor group led by James Dunning buying Petersen Publishing, Miller Publishing's acquisitions of Spin and The New York Times Sports titles, as well as Wasserstein Perella buying American Lawyer and National Law Publishing properties.
"There are more and more sophisticated buyers in the market and the financial buyers are more and more savvy about media," says Reed Phillips III, managing partner at D&P.
Managing Partner Roland DeSilva notes that the financial buyer has in some cases become the strategic player, such as Petersen Publishing, purchased by an investment group but now being run by magazine professionals who are snapping up strategic buys. Peterson just bought Inside Sports this month.
"Let's stop talking about financial and strategic buyers. The playing field has been leveled," he says.
Mr. Phillips says as more publishing companies become public, it tends to increase the number of transactions.
"Petersen is very acquisitive now that it has gone public. CMP Media is also very acquisitive" as a publicly held company.
Between October '97 and April '98, nine deals were consummated that were each more than $20 million, according to D&P: Wolters Kluwer acquired Waverly for $375 million; Primedia acquired Cowles Business Media and Cowles Enthusiast Media for $200 million; Wasserstein Perella bought National Law Publishing for $200 million; VS&A Communications Partners got T/SF Communications for $145 million; and Greenwich Street Capital Partners added Capital Publishing for $50 million.
Several factors are driving the market, according to the D&P report. Financial buyers are targeting companies to build publishing platforms that allow for significant economies of scale. The field of buyers for under $10-million companies has narrowed, while competition for companies with sales greater than $10 million has become more aggressive.
Buyers also want to see only profitable titles and have little patience for turnaround properties.
Magazine companies are continuing to diversify by buying conferences and expos to reduce dependence on ad revenues, as well as continuing to look for opportunities for international expansion.
New media deals are being fueled by three factors: Buyers have pricy stock to use for transactions; big names in traditional media, such as Hearst Corp., Time Warner, Times Mirror and Primedia, appear ready to buy; and successful small Web publishers are feeling insecure and are more willing to consider a home with a mainstream publisher.