Media Business - July 2010

Media M&A reports show robust growth continuing

FROM THE PUBLISHER Bob Felsenthal

BY SEAN CALLAHAN

Separate reports released late last month by investment banks Jordan, Edmiston Group and Petsky Prunier confirm that merger and acquisition activity in the media and marketing industries is booming.

Even with the stock markets experiencing a correction and consumer confidence waning, Scott Peters, co-president of Jordan, Edmiston Group, said M&A activity should be strong through the second half of the year.

“We’re not in a robust economy, but it’s not one that we think will have a negative impact on M&A,” he said. “There’s some motivation for sellers because of some tax changes coming up.” He also said credit is not as tight as it had been, which should also help propel deals.

Jordan, Edmiston’s M&A report focused on deal flow in the media, information and marketing services sector. The number of transactions in the first six months of this year increased 52% from the year-earlier period to 445, while the aggregate deal value surged 291% to $21 billion, according to the report.

Database and information services was the largest category in terms of deal value in the first half, with $9.3 billion in transactions. The marketing and interactive services category had the largest number of deals—131.

The number of deals in the b-to-b online media and technology category increased almost fourfold to 26, while the aggregate value increased more than fivefold to $363 million. Deals in this category included Tech Target’s acquisition of BeyeNetworks, an online network of sites, and Canon Communications’ acquisition of Pharmalot, a pharmaceutical industry blog.

The b-to-b media category saw similar gains in activity, with the number of deals increasing almost fourfold to 23 and the aggregate deal value jumping more than fivefold to $87 million.

The exhibitions and conferences category saw the number of deals decline 40% to 12 and the aggregate deal value fall 25% to $58 million.

Peters said the flow of dollars to b-to-b online media and technology was a simple result of dollars chasing growth potential.

“At the end of the day, investment dollars
in M&A tend to go where the growth is,” he
said. “If you think about b-to-b media, we are
still in a major period of transition from print
to digital, so there’s a big interest in chasing or
acquiring businesses that are helping to accel-
erate that transition.”
Jordan, Edmiston said private equity firms
are beginning to re-enter the market as the 45
private equity deals in the first half was a
“sharp increase” over the first half of 2009.
Additionally, private equity accounted for
the two largest deals so far this year: Madison
Dearborn Partners’ $2.5 billion acquisition of
TransUnion, a credit and information man-
agement company, and Silver Lake Partners
and Warburg Pincus’ $3.2 billion acquisition
of Interactive Data Corp., a financial informa-
tion business.

Petsky Prunier’s report focused on M&A activity in the marketing, information and digital media industries. It found that the number of transactions in the sectors it tracks increased to 224 in the second quarter, up 11% from the first quarter.

The aggregate deal value increased 39% to $12.2 billion, mainly due to the sale of Interactive Data Corp. sale.

Petsky Prunier tracks deals across seven segments: advertising and promotion, digital media, interactive advertising, marketing services, marketing technology, out-of-home and specialty media, and software and information.

Marketing technology was the most active category, with 69 transactions. Software & information deals produced the largest aggregate deal value—$5.0 billion.

“The investment markets are very good at the moment, and the M&A markets are even better,” Petsky Prunier partner John Prunier said in a statement. “Whatever credit support is lacking has seemingly been made up for by the resolve and depth in the ranks of corporate and private equity professionals diligently pursuing acquisitions.” ;

Innovation builds total audience Listening to the Top Innovators in Business Publishing at our recent annual awards luncheon in New York, I was struck by how many truly bright people still believe strongly in a great future for our industry. Some critics have said we in b-to-b media haven’t innovated in recent years and that our business is in a downward spiral that it can’t pull out of. But clearly these innovators don’t subscribe to that theory.

Northstar Travel Media’s Tom Kemp, one of our CEO award winners, was quick to acknowledge that many investors are devaluing business media as publishers struggle to change their business models. But marketers will spend again, and across many channels, he said, as the economy recovers and the b-to-b media industry deleverages itself. As Tom pointed out, we are now an audiencecentric business, and the audiences in our well-covered verticals will once again be very profitable.

Access Intelligence’s Don Pazour, another CEO winner, also emphasized a total audience approach as the path to future success. As Don said, we can ask the audience to pay for some kinds of content and we can deliver real-time leads. He also stressed that we no longer need to create just content, we need to build viable communities. Such communities, he emphasized, will provide many opportunities for growth through face-to-face events.

Clearly, we need to keep innovating and focus on the audience and community, not the platform. Then, cyclical growth will bring strong profits once more.