M&A Activity 2005 | Forecast 2006
M&A activity surged across the media and information industries in 2005, reaching levels not seen since 2000 (see accompanying chart). The year saw 525 deals completed, totaling $56 billion in value across the sectors tracked by The Jordan, Edmiston Group, Inc. (JEGI).
The M&A rebound began in 2004 and exploded in 2005. Major media companies pursued growth through acquisitions, as mass changes in media consumption led them to invest in digital technology. Diversified media companies, such as Gannett, New York Times, Dow Jones and News Corp., are rapidly acquiring fast growing online content and delivery channels to offset pressure on their traditional media products.
Along with these profound changes in the media landscape, attractive lending multiples, strong corporate balance sheets and historically low interest rates propelled the M&A market. The large investable cash positions accumulated by the private equity firms also contributed to sellers’ market conditions.
Additionally, during the downturn in the M&A market in the early 2000’s, smart firms reorganized expense structures, developed new platforms and improved content delivery channels. Now, these firms are tighter operationally with stronger balance sheets and in position to make acquisitions, essentially buying speed to market.
Another key driver of M&A going forward is the role of Google, Yahoo and other cash rich Internet companies that are repeatedly acquiring smart technologies and new innovations, even before the venture capitalists can get in the game. In fact, many entrepreneurs are building firms with the sole intention of selling to Google early and having access to the empire.
Overall, the durability of the digital media market drivers, the strength of the economy and JEGI’s pipeline of deal activity, suggest the appetite for consolidation and mergers will remain fundamentally strong well into 2006 and perhaps beyond.
For more news on Mergers & Acquisitions for the Media & Information Industries visit our website at http://www.jegi.com/