2008: What the Bankers Think
Deal brokers weigh in on what's ahead for magazines in 2008.
If you haven’t stopped by our massive (and growing) list of magazine predictions for 2008, do so. In the meantime, for those of you who are more financially inclined, I’ve pulled out the banker predictions and compiled them here.
Interestingly—predictably?—there’s a mix of optimism and wariness for the year ahead. On the one hand, we’re coming off an amazing run of M&A action fueled by the deep pockets of private equity. On the other, we’re still smarting a bit form last summer’s credit crunch and staring at a possible recession in 2008, which may stop the overly-leveraged dead in their tracks.
Here are the banker predictions. And click here to see the full, industry-wide list.
NAME: Reed Phillips
TITLE: Managing partner, desilva + phillips
2008 PREDICTION: Last year, I said I’d be watching with great interest the possible sale or break-up of the Tribune Company. Now, I think it is safe to predict that the company will be sold any day now. [EDITOR’S NOTE: Less than an hour after Reed sent this over, prediction #1 came true.] My prediction for 2008 is that by year-end valuations for newspapers, specifically, and print media, in general, will start to rebound.
NAME: Chris Shannon
TITLE: Managing director, Berkery Noyes
2008 PREDICTION: On the consumer side, M&A will be as busy as it was last year, as far as what’s in the funnel. Strategic buyers will make a comeback and play larger role in 2008. Everyone out there that’s either buying or selling it has to have a digital component. Next on the priority list for buyers is a mobile component. If you have a magazine to sell, the ones that have a Web site and even just the beginnings of a mobile product definitely have an advantage.
NAME: Larry Grimes
TITLE: President, W.B. Grimes & Company
2008 PREDICTION: More private equity firms will look to exit magazine publishing in 2008 but may find buyers slim to come by. Many will find their assets have depreciated substantially over the past 18 months, in large part due to mismanagement. The groups will recognize that the tuck-in acquisitions they have been avoiding for a couple years really do make sense and will start pursuing those smaller strategic deals as a way to boost both top and bottom line growth. Many of the publishers who have an eye on digital acquisitions will find the pickings are very slim and will realize growing digitally from within is their best approach. Video will become an increasingly important element of publishers’ online strategy and especially for their advertisers. Online directories will continue their metamorphosis from simple listings to interactive and will include product offerings. Deal flow will be slow until the banks start lending again.
NAME: Scott Peters
TITLE: Managing Director, The Jordan, Edmiston Group, Inc.
2008 PREDICTION: Media M&A in the middle market will remain active and will equal the transaction volume of 2007. However, overall transaction value will decline as the debt-heavy, mega deals get sidelined as the credit markets continue to work through challenging issues.
NAME: Thomas Kemp
TITLE: Managing director, Veronis Suhler Stevenson
1. The conversion from print advertising in magazines to online will accelerate in a softening economy in most, but not all markets.
2. We will see some highly leveraged transactions of the past couple of years experience extremely challenging times, what the bankers called distressed credits. Think Ziff Davis type experiences.
3. Financially backed media businesses that become distressed will replace their CEO’s. Some big name CEO’s will get fired in 2008.
4. Several b-to-b media companies that have adopted successful on-line strategies and cultures will thrive as eMedia achieves scale of revenue and profit.
5. Focused, high quality, leading magazines will continue to grow and buck the trend of the digital revolution.
6. M&A market will continue to be strong for quality assets, particularly for the middle market properties, $50 – 100 million, although transaction multiples will come back to earth as a result of tighter credit markets.
7. The media world will not come to an end as we know it. That is, Google will is not the evil empire of the media industry.