Media bankers, DeSilva & Phillips are predicting another record-setting deal year for 2007. But a recent survey by AdMedia Partners shows media executives are concerned that the number of sales may not be enough to meet the demand this year.
In its 2007 mergers and acquisitions report, media bankers DeSilva & Phillips tallied the dollar volume of the 2006 deal market at $20.5 billion, the strongest since 2000, and 242 percent higher than last year’s record-setting dollar value of $6 billion. DeSilva & Phillips tracked 151 deals in 2006, 22 percent higher than 2004’s record 124 deals and 36 percent above the average number of deals tracked over the past five years.
B-to-b transactions dominated the overall deal market in 2006, according to DeSilva & Phillips, accounting for 101 of the 151 deals the company tracked. B-to-b also dominated the company’s Top 15 deal list for 2006, claiming nine of the 15 spots. The sale of b-to-b media giant VNU to a group of private equity firms took the top spot on the Top 15 deal list with its $11.1 billion deal, which was the biggest b-to-b deal in history.
The $2.4 billion sale of Reader’s Digest Association to a group of investors led by private equity firm, Ripplewood Holdings was the biggest consumer deal of the year, the sixth largest of the past ten years, and took the No. 2 spot on DeSilva & Phillips’ Top 15 deal list.
Despite what appeared to be a domination by private equity in the M&A market, DeSilva & Phillips say private equity and strategic buying has reached parity and said the most active buying and selling was done by strategics with Reed Elsevier/Reed Business Media and United Business Media/CMP as the two biggest sellers of the year. Meanwhile, Prism Business Media and Hanley Wood were the two most active buyers.
DeSilva & Phillips is predicting another robust year in 2007 with just as many, if not more deals than were seen last year. They also anticipate more public companies going private, as VNU did last year and Reader’s Digest will do this year, as federal laws now make it more desirable for companies to be privately run.
Media Executives Cautious on 2007 Deal Market
However, a survey conducted last month by AdMedia Partners found that media executives believe there may not be enough potential acquisitions to meet the demand. In its 13th annual Prospects for Media Mergers and Acquisitions survey, many of the 1,700 media executives polled said they expect moderate to strong merger and acquisition growth this year.
Just over half of the respondents believe deals by strategic buyers will increase in 2006, but that private equity will remain the strongest force. A small percentage said they anticipate a decrease in strategic buying activity, said AdMedia managing director Mark Edmiston, in a statement.
Other findings included:
Four out of five respondents expect to complete an acquisition or divestiture this year, while four out of ten expect to contemplate a sales of their company or divestiture of a subsidiary. Just under a third expect to be involved in a transaction outside the U.S., down from 42 percent in 2006.
Nine out of ten respondents believe buyers and sellers value interactive media properties differently than other media properties, with traffic being the main criteria for valuating interactive properties.
Strategics expect to pay multiples this year at the same level as in 2006, but private equity/financial buyers "still awash in cash" may be able to increase their valuations for solid media properties.
Trade Show M&A Expected to be Strong in 2007
Events M&A firm, Corporate Solutions, in its January newsletter, said this week that trade show activity in 2006 was also at its highest level in six years at 33 transactions.
The biggest event transactions made in the publishing industry last year included Contemporary Forum’s sale of 35 medical events to Reed Exhibitions in June; the $100 million sale of Pfingsten Publishing, which included 29 events, to Wind Point Partners; the sale of 20 auto events from Action Media to Apprise Media; and the sale of 20 IT events from MediaLive to CMP Media.
The high selling and buying activity drove multiples up to six year highs, as well, said Nick Curci, president of Westport, Connecticut-based Corporate Solutions. "Multiples are high, but they’re not overstated," Curci said. "But companies aren’t paying the high multiples they once were. Private equity companies have learned that paying 8 to 10x multiples for large events in this market are reasonable and attainable, and the days of paying 10 to 15x EBITDA are over."
Curci also said strategics and private equity appeared equally matched in events M&A activity last year. "We saw a lot of strategics looking to buy smaller competitors," he said. "From a financial basis, we saw private equity funds very active in the later part of 2005 and all through 2006 because of the abundance of money that is now available from investors and because they’ve seen that events are a great way to get a good return on their investments."
Buying multiples may be at a six-year high, but Curci says the bottom isn’t expected to fall out anytime soon. "I don’t think so because multiples aren’t unreasonable," he said. "I think a lot of private equity firms have learned from the lessons of the past and prices at reasonable levels. I think the demand is going to remain strong because it’s there from both the buyers and sellers."
DeSilva & Phillips Top Deals 2006
Company, Buyer, Price
1 VNU NV, Valcon Acquisition BV, $11.1 billion
2 The Reader’s Digest Association, Ripplewood Holdings et al, $2.4 billion
3 Blackwell Publishing Ltd., JohnWiley & Sons Inc., $1.08 billion
4 MediMedia, Carlyle Group, Apax Partners, Cinven Vestar Capital Partners, $650 million
5 iVillage, NBC Universal, $600 million
6 Prism/Penton (50%), MidOcean Partners, $550 million
7 Penton Media, Wasserstein & Co., $530 million
8 Incisive Media, Apax Partners, $453 million
9 Metal Bulletin, Institutional Investor PLC, $408 million
10 US Weekly (50%), Wenner Media, $300 million
11 Forbes Media (40%), Elevation Partners, $275 million
12 Primedia’s Outdoor Group, InterMedia Partners, $170 million
13 Thompson Publishing Group, MidOcean Partners/Avista Capital Partners, $165 million
14 Commonwealth Business Media, United Business Media, $152 million
15 Primedia’s Crafts Group, Sandler Capital Management, $132 million