BtoB Media Business - December 2007 - (Page 24)

M&A Still on the fast track Report shows online media, interactive marketing services poised for more growth M&A BY MATTHEW SCHWARTZ ANALYST INSIGHT Kathleen Thomas Managing director, Berkery, Noyes & Co. B -to-b online media will outpace the market growth of b-to-b magazines on a compound annual basis from 2006 through 2010, according to a recent report from media investment bank Jordan, Edmiston Group. The report also found that while traditional media now accounts for more than 90% of the M&A market, interactive media and marketing services will account for 40% of the growth during the next four years. The report, “M&A Outlook and Valuations,” was released last month at Outsell’s Signature Event, which was co-produced with Jordan, Edmiston. It examined market trends affecting M&A activity in three areas: b-to-b media, b-to-c media and marketing services. According to the report, b-to-b online media are expected to grow 23% on a compound annual basis from 2006 through 2010, while b-to-b magazines and events are expected to grow 3%. Database and information products are expected to grow 5%. “Some print properties are on a gentle decline, but online and events continue to grow strongly,” said Wilma Jordan, CEO of Jordan, Edmiston. It’s a similar trend for marketing services. Interactive marketing services are expected to grow 35% on a compound annual basis compared with 5% for traditional marketing services. Yet traditional marketing services will still comprise 85% of the market in 2010, according to the report. Interactive marketing services grew 91% on a compound annual basis from 2001 through 2007 compared with 19% growth for traditional marketing services, the report said. The value of interactive marketing deals this year ($15.8 billion) eclipsed that of traditional marketing services ($11.8 billion). But it’s important to note that three deals accounted for $9.5 billion of the total interactive transaction value: MicrosoftaQuantive, Yahoo-Right Media and GoogleDoubleClick, which is still pending. All media and information market sectors tracked in the report grew substantially on a compound annual basis from 2001 through 2006 and continue to outpace the U.S. gross domestic product. B-to-b media led the pack, up 6.1% (to $160 billion in market spending), followed by marketing services, up 5.4% (to $204 billion), and b-to-c media, up 3.9% (to $101 billion). GDP grew 2.9% on a compound annual basis from 2001 through 2006. “The report reinforces that b-to-b media is a very good investing category and will continue to be one of the strong drivers in M&A,” Jordan said, adding that the credit crunch and subprime mortgage crisis are not having a serious impact on the desire for b-to-b media deals. She stressed that transaction values within the media industry remain robust. In the first nine months of this year alone, the value of M&A transactions totaled $59.5 billion, 18% greater than the total for all of 2006. “There is a lot of liquidity in the pipeline,” she said. Private equity firms have $1 trillion under management—eight times 1995 levels—with a $300 billion “overhang of uninvested capital,” according to the report. Credit crunch not hampering deals A lthough the credit crisis is deepening, b-to-b media players are still eager to make deals, according to Kathleen Thomas, a managing director at media investment TIPS bank Berkery, Do: Sellers Noyes & Co. need to do “I’ve got major what’s best for transactions signed the growth of that will close in the their business. next few weeks, and If that means the prices are beyond exploring investors and/ expectations,” or partners in Thomas said. order to take She added that your business she hasn’t come to the next levacross any data el, you should showing prices for do so. Don’t: Sellers b-to-b media deals have dropped in any need not automatically material way assume that because of the credit valuations will crunch. come down “Pricing doesn’t because credit have to come down has tightened. just because credit is There are many buyers, more expensive,” strategic and she said. financial, with Private equity aggressive companies, which buying have fueled many of mandates. the larger b-to-b media transactions in the last few years, have so far this year raised $300 billion, Thomas said. “It suggests an incomprehensible amount of money they have to put to work,” she said. “They won’t get the same credit terms they were getting [earlier this year], but there’s a good chance they will adjust return hurdles and, instead of getting a 25% equity return, they may get 22%.” —Matthew Schwartz A roundup of recent mergers and acquisitions M&A ACTION Date Property 11/07 Better Roads, Aggregates Manager 11/07 Environmental Business Journal, Environmental Industry Summit 10/07 Education Plaza Description Trade magazines Trade magazine and trade show Seller James International Media Environmental Business International Buyer Randall-Reilly Publishing Co. ZweigWhite Information Services 1105 Media Web-based buyer’s Education resource for K-12 Plaza administrators Source: Jordan, Edmiston Group Transaction Database, 2007 24 | Media Business | December 2007 | mediabusinessonline.com http://mediabusinessonline.com

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BtoB Media Business - December 2007 Contents Upfront Vertical Outlook Resource Guide Sales & Marketing M&A Events Production Online Circulation People Benchmarks Endnote

BtoB Media Business - December 2007

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