JEGI: B-to-B M&A Market to Remain Strong, Penton Could be Bellwether
The b-to-b M&A market is expected to remain strong and the Penton Media deal, expected to close within the next few weeks, could be the bellwether for what’s to come, says one M&A expert. “I think there will be continuing activity for good companies right through 2007,” says Richard Mead, a managing partner at the Jordan, Edmiston Group.
According to JEGI’s latest client briefing, cash-heavy private equity firms continue to drive growth in the b-to-b M&A market, as does the healthy economy, helped by lower oil prices and declining unemployment rates.
Overall deal activity for the sectors tracked by JEGI stands at 493 transactions completed through the first three quarters of the year, putting the M&A market on pace to far surpass 2005 levels, according to the client briefing. “We have a robust outlook on the M&A market, especially in the b-to-b sector,” says Mead. “There are a lot of sellers interested in reaching out to buyers and a lot of buyers including strategics, private equity buyers and senior debt vendors reaching out to sellers.”
While Penton is certainly the most watched deal at this juncture, with analysts predicting the company could net $500 million in a sale, Mead expects at least one, if not two, other b-to-b deals to close by the end of the year. Other b-to-b companies said to be looking for buyers include Highline Media and Pfingsten.
And even though some would-be sales have failed at auction over the last few months, namely CurtCo and Cygnus, Mead says the failures are not demonstrative of the deal climate, but rather the inflated expectations of the sellers. “It’s always better to expect less and be delighted afterwards,” he said. “If you talk to a number of advisors and get a range of valuations and go with the high number, you’re always going to be disappointed.”
Mead also predicted that the Ziff Davis sale might not net the kind of price its management is hoping for. “Well, it looks now as if it will be broken apart (in a sale),” he says. “And if Penton is the bellwether, Ziff is, well, unfortunate.”