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M&A 2006: A Look Back at the Year's Biggest Deals and What 2007 Might Bring



By FOLIO: Staff
12/21/2006

Private equity continues to dominate magazine deal market.

The 2006 M&A market can be summed up in two words: Private Equity. The robust mergers and acquisition market was dominated by PE firms, which continued to drive up both the number and pricing of deals, media investment bankers said this week. "I think there are a couple of different headlines for 2006," said Scott Peters, managing partner with the Jordan, Edmiston Group. "But I think the main one is private equity driving unprecedented M&A activity on both the buy and sell side of the industry."

Reed Phillips, managing partner of DeSilva & Phillips, says his firm tracked 150 deals involving consumer and b-to-b magazines, trade shows, and medical media, the most in 11 years. "Generally, the average is around 100 deals a year," he said. "So there were 50 percent more deals this year than the average."

The biggest deals of the year were all made by private equity firms including the $9.7 billion purchase of VNU B.V. by a consortium of private equity firms; the $1.61 billion purchase of Readers Digest Co. by Ripplewood Holdings; the $530 million purchase of Penton Media by Wasserstein & Co.; and the approximately $200 million purchase of both Pfingsten Publishing and Highline Media by Wind Point Partners.

Phillips says the interest of private equity firms is two-fold. "The first is just the large amount of private equity money that is available," he said. "But also, I think private equity is aiming that money at media because they're comfortable with it. A lot of private equity firms know media, understand it thoroughly and are, therefore, better able to evaluate the deals."

Mark Edmiston, managing director of AdMedia Partners, said 2006 not only marked the dominance of private equity, but also the resurgence of b-to-b. "B-to-b had been the quietest corner of the media market for years," he said. "The bubble burst after the recession of 2001 and that looked like the end of b-to-b. But now you have a company like Wasserstein that's put together almost a billion-dollar b-to-b company."

Edmiston says b-to-b is gaining interest from private equity firms that have found the b-to-b model to complement the new publishing model that is dominated by the Internet. "A lot of these companies are finding success in using the Wall Street Journal's model, which says if you want news go to our Web site and, if you want analysis, read our newspaper," he said.

On the consumer side, both Peters and Edmiston said a lot of strategics, like Primedia, Time Inc., Hachette-Filipacchi and Hearst, are closing or selling off non-core assets, in many cases to private equity firms, as they shift their focus to digital media.

Drew Lawler, owner of AJ Lawler Partners, said even though private equity had a lot of cash to spend this year, it didn't spend it frivolously. "It was a year of smart acquisitions," he said. "Everyone that has made a purchase has done it with the realism in mind that the price they pay ultimately has to pencil out. Although there's been some multiples that have been eyebrow raising, we're not seeing the stupid money that we saw at the peak of the Internet explosion."

On average, the media bankers said 2006 sales brought in revenue multiples of between 9 and 12 percent on the consumer side, 6 to 9 percent on the b-to-b side and about 5-to-6 percent on the event side.


Up Next: 2007

At ABM's November Top Management Meeting in Chicago, the buzz was all about the hot M&A market and how high lending margins and low interest rates are fueling the market. But many cautioned the market could cool off should interest rates go up. "Debt oils the M&A market," said Matthew J. Lori, managing director of CCMP Capital which owns Hanley Wood and Ascend Media. "You can get mezzanine financing at 11 percent these days. You used to have to pay 15."

But for now media bankers predict much of the same going into 2007. "We normally have very good visibility six months out and it looks like things will be very strong from an M&A stand point," Peters said. "I think we'll continue to see a dominance of private equity-backed platforms and a number of sellers continuing to sell because the buyers are driven."

Lawler said sluggish print advertising sales will ensure that private equity, at least for now, will continue to dominate the M&A market. "Until we see five years of growth in ad pages paying top multiples, I think the M&A market will be dominated by private equity," he said.


Notable Deals of 2006:

Seller
Buyer
Price

101communications
1105 Media
$75 million (estimated)

VNU
Valcon Acquisition B.V.
$9.7 billion

Penton Business Media
Prism/Wasserstein & Co.
$530 million

Highline Media
Wind Point Partners
$90 million (estimated)

Pfingsten Publishing
Wind Point Partners
$100 million (estimated)

CMP Entertainment Portfolio (UBM)
The Wicks Group
$47 million

Commonwealth Business Media
United Business Media
$152 million

Readers Digest
Ripplewood Holdings
$1.61 billion

Primedia - Crafts Group
Sandler Capital Management
$132 million

Primedia hunting, fishing and shooting assets
Intermedia Partners
$170 million

Spin
McEvoy Group
Terms not disclosed

Vibe
The Wicks Group
Terms not disclosed

Supermarket News (Conde Nast)
Prism
Terms not disclosed

InFurniture (Conde Nast)
North American Publishing
Terms not disclosed

Stevens Publishing
1105 Media
Terms not disclosed

By FOLIO: Staff
12/21/2006







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