Media Business - July 2010

A bridge to new markets
Hearst creates new digital marketing services
business unit with iCrossing acquisition

Tom O’Connor Managing director, Berkery Noyes

BY MATTHEW SCHWARTZ

Hearst Corp.’s acquisition of digital marketing agency iCrossing pro- vides a huge boost to the media company’s efforts to diversify its digital investments and offer new online capabilities to clients.

Hearst acquired iCrossing June 3 for a reported $325 million. The agency, which will operate independently and retain its name, provides the foundation of a new business unit called Hearst Marketing Services. So far, it is the only component of the unit, but add-ons are expected to follow.

“I would think there would be other
deals,” said Don Scales,” president-CEO of
iCrossing, whose clients include Epson
America and Toyota of America. “Big com-
panies need big numbers. By adding a few
more into the mix, we’ll have a larger mater-
ial impact on Hearst.”
Matthew Petersen, senior VP-Hearst
Magazines, who is overseeing Hearst Market-
ing Services, said: “We are committed to sup-
port and fuel iCrossing’s continued growth
independently, and it is extremely important
for a company like iCrossing to make appro-
priate investments, which may include ac-
quisitions, to stay ahead of the market.”
Petersen joined Hearst in March from
Meredith Corp., where he was senior VP of
Meredith Integrated Marketing. During his
tenure at Meredith, he oversaw the integra-
tion of several marketing agencies acquired
by the publisher, including New Media
Strategies and Big Communications.

A roundup of recent mergers and acquisitions

Date Property Description Seller Buyer

6/10 Complinet Provider of global compliance
information solutions for the
financial services industry
Complinet
Thomson
Reuters

6/10 Expocomm
Events
Trade shows and exhibitions
for the telecommunications
industry

6/10 Navalshore Trade shows and conferences
for the maritime industry
Navalshore United
Reed
Exhibitions
E.J. Krause &
Associates

Wait for multiples to bounce back

Tom O’Connor, managing director of me- dia investment bank Berkery Noyes, recently discussed how the M&A market is shaping up for the rest of the year.

Media Business:What’s your outlook for the media M&A market?

O’Connor: We do think we’ll see the amount of deal flow continue to improve through the balance of 2010 and really take off in 2011. What we have seen is private equity firms selling their portfolio companies and some corporate divestitures, such as [Reed Elsevier liquidating most of its b-to-b portfolio in the U.S.], but what we haven’t seen is the entrepreneur step up. However, we do think the entrepreneur who wants liquidity, considering the conversations we’ve been having, will be part of that deal flow in 2011.

MB: What kinds of media properties are buyers eyeing these days? Howis the appetite for events?

O’Connor: Both financial and strategic buyers tend to look for the same types of properties. If you’re in the events business right now, you’re probably not selling. There have been a lot of event deals [recently] because the multiples have been down, so sellers are now waiting for multiples to come back up. But everybody’s looking for digital solutions, Web-enabled properties, SAS-type models and more online solutions on the advertising front.

MB:Do you see the trend of traditional publishers acquiring marketing services companies accelerating in the next several months?

O’Connor: You will see large, strategic buyers looking more and more at concentric and neighboring markets. Some publishers have limited growth in their core markets, so they’re looking for marketing services companies as a way to pick up the growth and see these types of companies as an extension of their core products. —M.S.