After a “moribund” 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.’s October 12 purchase of Conceive (its fourth deal in the previous 12 months) from its founder and a group of investors, and Bloomberg LLP’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 “been focused on improving profitability and restructuring debt in overleveraged portfolios.”
“Eighty percent of private equity firms are spending 80 percent of their time focused on portfolio companies,” says JEGI managing director Tolman Geffs. “That means there’s a good opportunity for the remaining 20 percent to focus on growth areas, but we think that portion will stay subdued into 2010.”
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 & Training—which JEGI says has benefited from innovation, government spending and “some shelter” from the distressed economy—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.
“Groups that still have the capacity to do so will look for new growth channels but we’re still going to see continued retrading of assets to resolve distress situations,” 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).