Media M&A Sees Uptick in Third Quarter
Report: Q3 deal value makes up nearly 70 percent of combined value in 2009.
After a â€śmoribundâ€ť first half, media M&A as a whole saw a significant uptick during the third quarter, which might be an indication that deal transactions are on the rebound, according to a quarterly report released by investment banker the Jordan, Edmiston Group. Deals spiked during the quarter, with 168 transactions announced, valued at $11.1 billion. Comparatively, there were 300 deals during the entire first half of the year, valued at $5.3 billion.
Since the third quarter some notable acquisitions include Bonnier Corp.â€™s October 12 purchase of Conceive (its fourth deal in the previous 12 months) from its founder and a group of investors, and Bloomberg LLPâ€™s agreement to buy BusinessWeek from McGraw-Hill. That deal was estimated to be worth between $2 million and $5 million (although the sale price might seem considerably low, the magazine reportedly lost more than $43 million in 2008 and carried more than $30 million in debt).
Through the first nine months, average deal size grew from $18 million during the first half to $66 million in the third quarter, the report says. Deal announcements totaled 466, down 30 percent compared to the same period in 2008. Deal value dropped 42 percent to a combined $16.4 billion. JEGI said strategic buyers accounted for roughly 80 percent of total deal value through the third quarter. Private equity firms, meanwhile, have played a minor role as many have â€śbeen focused on improving profitability and restructuring debt in overleveraged portfolios.â€ť
â€śEighty percent of private equity firms are spending 80 percent of their time focused on portfolio companies,â€ť says JEGI managing director Tolman Geffs. â€śThat means thereâ€™s a good opportunity for the remaining 20 percent to focus on growth areas, but we think that portion will stay subdued into 2010.â€ť
Consumer, B-to-B Media Deals Decline
Of the 12 market sectors tracked by JEGI, only two grew through the third quarter. Mobile Media & Technology saw the number of deals increase 56.3 percent to 25 and deal value jump 75.7 percent to $396 million, compared to the same period last year. Education Information, Technology & Trainingâ€”which JEGI says has benefited from innovation, government spending and â€śsome shelterâ€ť from the distressed economyâ€”saw the number of deals (62) grow 14.8 percent and value ($3.16 billion) increase 41.4 percent.
The B-to-B Media sector saw only 11 deals announced through the first nine months, a decrease of 45 percent compared to the same period last year, as deal activity was made up primarily of distressed assets. Deal value plummeted 87.1 percent to $51 million. The Consumer Magazines sector was active with 31 announced deals, a decline of 6.1 percent, and deal value mostly flat at $163 million, a decrease of 1.1 percent.
â€śGroups that still have the capacity to do so will look for new growth channels but weâ€™re still going to see continued retrading of assets to resolve distress situations,â€ť Geffs says.
Although down significantly from the same period last year, the Online Media & Technology sector reported the largest number of transactions (141, down 31.2 percent) and the greatest deal value ($7.57 billion, down 25.6 percent).