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The Top Media Deals of 2013

Big sales in custom publishing, data services, events and e-commerce.



Michael Rondon By Michael Rondon
03/12/2014

As the definition of what constitutes a media company evolves, the trends playing into that discussion get reflected in mergers and acquisitions. Popular, buzzy sectors get bolted on; underperformers get sent away, sometimes for pennies on the dollar. Private equity looks to capitalize on both.

The total volume of deals stayed flat in 2013, while trends in aggregate value were mixed, according to several year-end studies. Strategic buyers definitively topped financials as the more active purchasing group however, as companies looked to add value or bolster margins.

Petsky Prunier and Berkery Noyes, two investment banking firms specializing in media markets, each reported that strategic acquisitions made up more than 90 percent of industry M&A activity in 2013—a high point in recent years. (Editor's note: The reports do not measure identical markets.)

A recent survey by AdMedia Partners further highlights the difference in how each group perceives the market. Eighty percent of potential strategic purchasers feel M&A will increase in 2014, while less than half of financial buyers agree.

Regardless of who was buying, it was also apparent they were paying more. Sale prices for media properties averaged 9.7-times EBITDA—a popular valuation metric—rebounding from 8.0x in 2012, according to Berkery Noyes. Revenue multiples also bounced back, hitting 2.0x.

Though well over a thousand deals took place last year, we've highlighted a few of the notable ones.

—

What sold? McMurry and TMG Custom Media
Who bought it? The Wicks Group
How much? Undisclosed
When? January

The Wicks Group bet big on content marketing to start the year, buying and merging the custom publishing houses to create McMurry/TMG. Together, the joint unit was reported to have annual revenues closing in on $100 million with 270 employees. Matt Petersen, a former Hearst exec, was named CEO.

"[Content marketing] has been taking off," Petersen told Folio: at the time of the deal. "Brands more and more take on the characteristics of media and need expert stewardship of that content."

Word on the street: "There are not a lot of buyers for custom media publishers, so putting two together and selling them to Wicks was a good outcome. Buyers don't pay up for custom publishing, but with more scale at least two sellers were able to make a deal work."

"High beta. This could be wildly successful or it could be a challenge down the road if contracts are not renewed."

What sold? IGN Entertainment
Who bought it? j2 Global
How much? Less than $100 million
When? February

j2 Global, primarily a cloud services provider, added to its digital media portfolio in early 2013 after acquiring Ziff Davis for $167 million just months prior. A tech, gamer and lifestyle network, IGN was a natural fit with ZD.

The company tacked on another tech media network, NetShelter, in May. Financial terms of the deal weren't disclosed, though reports put it under $100 million.

For News Corp., the sale came ahead the company's formal split in June. Chairman and CEO Rupert Murdoch spun the broadcasting division into its own publicly-traded entity, while turning the publishing assets into another.

The price tag of $100 million or less likely came as a disappointment for News Corp. investors—it paid $650 million for the property in 2005.

Word on the street: "Very accretive acquisition."

What sold? UBM Data Services
Who bought it? Electra Partners
How much? $252 million
When? February

The b-to-b giant sold most of its data services after what it termed a "strategic review" that began in the summer of 2012. Revenue for the unit, known as Delta, had trended downward recently, settling at about $280 million. Operating profits also declined to $43.2 million in 2012.

The sale was the latest in a series of moves UBM CEO David Levin had overseen.

"By divesting Delta we simplify UBM's business," he said. "We can now look forward to focusing on further developing UBM as a fast-growing and increasingly profitable events-led, marketing services and communications business."

In September, Levin announced he would be leaving the company in 2014.

Word on the street: "This was a nice acquisition by Electra Partners, they got some very nice assets. UBM acted like a financial sponsor here, acquiring many assets in 2006 and holding them for 7 years."

What sold? Source Interlink's Motorcycle Brands
Who bought it? Bonnier
How much? Undisclosed
When? May

Bonnier got nine motorcycle titles in all, while selling most of its TransWorld sports titles to Source Interlink in a separate, but concurrent transaction. The deals capped off a busy month for Bonnier: Meredith absorbed its family titles, Parenting and Babytalk, a week prior, while its snowsports portfolio went to Active Interest Media two weeks before that. Terms weren't released for any of the acquisitions.

"The transactions today are the last in a series of moves we have implemented to transform our company to one that will achieve revenue growth and sustained profitability," Dave Freygang, CEO of Bonnier, said in an internal memo at the time. "I realize this spring has brought significant change to our company. I also recognize that change creates uncertainty. Please be certain of this: We have our operating groups and brands in place."

Word on the street: "Bonnier continues to pick up enthusiast magazines aimed at men, however, with the departure of [CEO] Terry Snow and [Chairman] Jonas Bonnier, that strategy is likely to change."

"The enthusiast market continues to show strength as strategic buyers focus on core markets."

What sold? Society6
Who bought it? Demand Media
How much? $94 million
When? June

SEO-driven content factory Demand Media made a big commitment to e-commerce last summer.

Society6, an online marketplace for art, clothing and accessories, had about 300,000 members at the time of the sale. Revenue was reportedly $15 million.

The acquisition turned out to be the first of several dominos to fall at Demand. Co-founder, chairman and CEO Richard Rosenblatt left the company in October, and in early 2014, Demand eliminated its direct sales business, committing fully to programmatic advertising.

Word on the street: "E-commerce is growing, but Demand has bigger problems."

What sold? Cygnus's Agriculture Group
Who bought it? The American Farm Bureau Federation
How much? Undisclosed
When? August

Cygnus announced that its agriculture assets—five trade events and two publications—were on the block in February. While CEO John French said the division was profitable, they weren't considered core properties.

"We're still owned by banks and by that definition at some point we'll have to sell the company," he said at the time the group was made available. "My job has been to come in and take the company out of bankruptcy and improve value. And the ag group [sale] is the first manifestation of that value increase."

The linchpins of the deal—Minnesota Farmfest, Dakotafest and the Amarillo Farm & Ranch Show—each draw at least 30,000 attendees annually.

Word on the street: "Cygnus has been winding down for years."

What sold? Newsweek
Who bought it? IBT Media
How much? Undisclosed
When? August

The Newsweek soap opera took another turn last summer when the brand was purchased by under-the-radar digital publisher, IBT Media—it's the magazine's fourth ownership group since 2010 (Washington Post Co., Sidney Harman, IAC).

The acquisition was the latest in a series of expansion moves for IBT Media, which launched four vertical sites and a video portal in 2013. Adding Newsweek took it a step further, getting the company into several new lines of business.

"We've had plans to develop business models such as subscriptions, events, et cetera, but the Newsweek acquisition allows us to bring ready-made, growing business products that we didn't have before," Etienne Uzac, IBT's co-founder and CEO, told Folio: at the time of the deal.

A print magazine was apparently one of those products. In December, editor-in-chief Jim Impoco announced that Newsweek would return to ink and paper. While the plan called for a presumably more stable subscriber-driven model, familiar problems have emerged-the first issue's already been pushed back due to a lack of advertiser support.

Word on the street: "Another distress sale of Newsweek. Someone, please put this magazine out of its misery."

What sold? American Express Publishing
Who bought it? Time Inc.
How much? Less than $100 million
When? September

After first partnering on back-end services in 1993, the deal cemented a 20-year relationship between Time Inc. and the five Amex titles.

Timing suggests that the deal was motivated by Time Inc.'s impending spin-off, but Amex said it needed to get rid of its publishing arm because of regulatory hindrances related to its banking operations. Amex is staying involved with the titles in a marketing capacity however, even though it's getting out of ownership.

While five titles were acquired, just four remain—Executive Travel was shut down in January. And in February, Time Inc. began a significant round of layoffs, many of which were expected to hit the Amex division.

Word on the street: "It was inevitable. The Amex magazines should be a good fit with InStyle, Cooking Light, Real Simple and Health."

"The industry has been waiting for this transaction for many years. Good deal for Time Inc."

Michael Rondon By Michael Rondon
03/12/2014







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