Private Equity Boom and Shorter Holding Periods Spicing Up Media M&A Market
NEW YORK; The sold-out DeSilva + Philips Media Dealmakers 2006 Summit drew 277 attendees this week looking to make sense of the red-hot media M&A market. Deal volume in 2005, the biggest year for media M&A since 2000, totaled nearly $6 billion according to DeSilva + Phillips.
While there was talk of strategic buyers returning to the marketplace (strategics had market share of 49 percent of the Top 15 deals in 2005, up from just four percent in 2004), many still say it’s hard for strategics to compete with equity players for M&As, including Reed Business Information CEO Tad Smith, who offered the opinion that private equity players surprisingly are more willing to gamble these days than strategics. "Corporate players put cost synergies in the bank while equity players are willing to gamble on revenue synergies," said Smith. "Revenue is a wonderful fringe benefit [for strategics]. I’m accountable for every deal. I’m not being evaluated on whether one deal in 13 went bad, I’m being evaluated one to one."
Still, media M&A veteran and Apax Partners co-founder Alan Patricoff says the private equity money available today makes it an exciting time for the publishing industry, particularly smaller companies new to the game. "Magazine money is hugely available: the private equity market is overflowing with money," Patricoff said. "The holding period has gotten much shorter than three to five years. Personally, I’m focused on smaller, younger companies."
Patricoff says there is potential for IPOs to become an attractive option once more for publishing companies. "The IPO market is not so hot right now but if it does open up, more publications will opt for that because IPOs tend to have more exuberant buyers," he added.
Market focus rather than scale was also emphasized. Wasserstein vice chairman Anup Bagaria, whose portfolio includes American Lawyer Media, The Deal LLC and recently acquired Prism Business Media for $385 million, was asked that although he has a reputation for keeping a close reign on costs, was he "as disciplined a buyer as an owner?" Wicks Business Information president and CEO Doug Manoni later added, "We’ve seen the deconstruction of publishers who relied on scale rather than market-focus. Today acquisitions offer more predictability."
Randall-Reilly CEO F. Michael Reilly, who lead a management buyout of the $65 million publisher last November, advised publishers feeling the heat from their backers to take a strong stand. "Stiff arm your lendors. They cannot and do not want to run your company."