M&A Scorecard: January 2006 - M and A and Finance @ FolioMag.com

By Bill Mickey

Debt As Deal Breaker

Advanstar, a fashion, life sciences and powersports media company, put the brakes on its sale ambitions;hard. After announcing it was "exploring strategic options" in July, owner DLJ Merchant Banking Partners, which paid Hellman & Freeman Capital Partners more than $900 million plus the assumption of $520 million in debt in 2000, pulled the company off the block in early December. Advanstar CEO Joe Loggia said DLJ decided it wanted to keep the business based on third-quarter performance and corporate restructuring.

Sources, however, speculated that price and debt conspired to smother the deal. Advanstar's debt is now $700 million and its asking price was likely between $800 and $900 million. Additionally, the sale came with a $75 million premium to buy out existing bondholders. "It's fair to speculate that the debt-breakage cost was an unresolved issue," said one source.

The sales process went far enough for DLJ to have accepted bids. Bob Krakoff, an ex-CEO of Advanstar was reportedly a front-runner with his new company, Blantyre Partners. "It's very frustrating. You spend a lot of time and money evaluating, and then they decide not to do anything," said Krakoff.

Loggia maintains DLJ has simply turned a bullish cheek. "They want to bet on the business. It is not the same Advanstar. Remember, the process was us exploring a lot of strategic options. People from the outside only know the parts they were involved with."

Our panel says: "I can't see any reason why they can't sell off a few assets, adjust their cost structure, make a few small acquisitions and go back to market and sell the company. That's what happened before with Thomson Media."

IPO Fever

Information technology publishers TechTarget confirmed reports last November that the company ditched exploration of a sale in favor of a 2006 IPO. The company hired investment banker UBS to assist with the sales process. While reports put TechTarget's sale price at $300 million, sources told Folio: that the price was closer to $600 million.

Instead, TechTarget officially announced in a statement in November its interest in an IPO: "TechTarget has decided to continue on the path of growth as an independent company and to make the appropriate preparations that will enable it to pursue a public offering in 2006."

Meanwhile, a management shuffle makes executive vice president Kevin Beam head of TechTarget's seven media groups. Three vice presidents;VP and editor-in-chief Paul Gillen, VP of sales John Cox, and EVP and group publisher Joe Levy;have left the company to pursue other interests.

Our panel says: "It's all about getting the strongest valuation for the business. It comes down to multiples and valuation."

DECEMBER 1

Buyer: Spire Capital
Seller: Gemstar-TV Guide
Sale Price: $52 million
Revenue Multiple: 1X

The deal behind the deal: On the heels of closing television celebrity weekly Inside TV,

Gemstar-TV Guide announced the sale of SkyMall, its retail business

best known for its inflight catalog. The transaction was structured as

a merger.

The buyer, New York-based Spire Capital Partners, with

a $260 million private equity fund, also backs Andrew Goodenough's

Highline Media.

Announcing the deal, Gemstar CEO Rich Battista structured his statement verbatim to the Inside TV shut-down, citing a focus on "core assets" and pursuing a "new cross-platform guidance strategy," one in which SkyMall and Inside TV didn't fit since neither were considered "guidance" assets.

Our panel says: "It's the old notion that it doesn't strategically fit with the other products. But, it sure was a nice side business to have."

"They're obviously scaling back their print publishing platform. TV Guide is hanging in there simply because of what they call its guidance features."
DECEMBER 12

Buyer: Plus Three
Seller: Primedia
Sale Price: N/A
Revenue Multiple: N/A
The deal behind the deal: Plus

Three, a marketing and technology company bought its way into online

content publishing with its acquisition of the assets of Primedia's

Internet Resources Technology Group (PIRT). PIRT's management team

comes along with the sale.

Non-human assets include an open

source publishing tool called Krang; a membership and subscription

tool; a centralized paid content platform; and Shuzal, a tool that

builds user data collection forms. The technology is responsible for

maintaining the back end of Primedia's 300 online publications. Plus

Three becomes an outsourced vendor for Primedia and will continue to

oversee its content management platform.
Our panel says: "This