The good news for the media M&A market is that multiples will stay at last year’s historically high levels through 2006, according to AdMedia Partners
‘ Prospects for Media Managers & Acquisitions survey. However, the report also suggests the market could see significant cooling in 2007-2008, simply because there won’t be enough quality properties for sale.
The majority of survey respondents say media M&As driven by both strategic (67 percent) and financial buyers (70 percent) will increase. Only 5 percent predicted a slowdown.
While 56 percent of respondents expect strategic and financial buyers to increase valuations for solid media properties in 2006, a substantial minority believes the opposite. The report also says there are indications that EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiples could plateau for magazines. At opposite ends of the spectrum, newspaper EBITDA is down to 9-10x, while interactive media tops out at 14x.
Four out of five respondents expect to complete an acquisition or divestiture in 2006 and 42 percent expect to be involved in an M&A transaction outside the U.S. However, fewer than half of respondents think there are currently a healthy number of quality media acquisition targets, although there is a slightly more optimistic attitude this year (46 percent) than last year (when only 36 percent thought there were a significant number of quality media prospects).
Still, if consolidation continues, AdMedia managing director Mark Edmiston warns there could be a severe shortage of viable acquisition targets in 2007-2008. "It seems as though there are few high quality properties for sale," said one respondent. "Those that do come up on market are either distressed or overextended as part of a financial rollup." Another respondent adds, "Private equity valuations are driving prices up, in some cases beyond the (sensible) reach of strategic purchasers."
While respondents that say sellers should "act now" has risen over last two years, the number advising buyers to "act now" has fallen to lowest level since 2001.
The survey included respondents made up of companies that operate in a variety of consumer and b-to-b media. Seventy-nine percent are private and 21 percent are public. Forty percent have revenues of $100 million or greater and 21 percent have revenues of under $10 million.
JEGI: 508 Deals Worth $55 Billion in 2005
Elsewhere, the Jordan, Edmiston Group
released a client briefing saying there were 508 media and information industry deals worth a combined $55 billion in 2005. The report says that attractive lending multiples, strong corporate balance sheets and historically low interest rates helped fuel the market.