BtoB Media Business - December 2008 - (Page 27)

M&A Vets size up M&A market Long-time publishing executives Casella and Kemp say dealmaking has dropped off sharply BY DAVID W. FREEMAN ANALYST INSIGHT John Suhler General partner, Veronis Suhler Stevenson he deepening recession has brought dealmaking in the b-to-b media space almost to a standstill. That’s the word from Jim Casella and Tom Kemp, veteran b-to-b media executives who launched media M&A companies of their own in the past two years. “This quarter is going to be one of the slowest we’ve ever seen,” said Casella, chairman-CEO of Case Interactive Media, a New York-based private equity firm he founded last year that focuses on acquiring companies with annual trailing EBITDA of $5 million to $25 million. “We haven’t seen anything like this since the quarter following 9/11. Not a lot is going on.” Casella, former vice chairman of Reed Business Information, said M&A activity had slowed across all sectors of b-to-b media. He said strategic companies and private equity firms, including his own, continue to pursue deals, but he predicted these will be fewer in number and on a smaller scale than in previous years. Kemp, CEO of Oakstreet Media, a media acquisitions firm that he launched this past spring after serving as CEO of Miller Freeman and Penton Media and managing director of media investment bank Veronis Suhler Stevenson, echoed Casella’s bleak assessment. “Earlier in the year we had weakness in the credit markets, but you could still find lenders for smaller deals,” he said. “But this T has become a full-blown economic downturn. Trying to get anyone to make [financial] commitments or write checks is now very difficult. No one wants to buy a company on its way down and then spend the next two years trying to break even.” Kemp, whose firm focuses on lower-midmarket b-to-b media and information companies, said he had been working on “a few deals” but gave no details. He said a deal that fell through last spring had been resurrected recently after the seller acknowledged that the price it had been seeking was now unrealistically high. “Sellers have gotten the message that their companies are now worth less,” Kemp said from his office in New Canaan, Conn. “They realize that if they want to sell, they must be more cooperative and flexible on pricing.” Case Interactive Media, which is backed by Austin Ventures, is better positioned than many media acquisition firms to make deals without taking on debt, Casella said. But even with this advantage, he said, the company has only two deals in the works, both of which he characterized as “relatively small.” Casella predicted that business conditions wouldn’t improve substantially until the second half of next year. “This is not something that is going to end on the first day of the Bush-Obama transition,” he said. “The first quarter of ‘09 will be difficult. I hope to see a little daylight in the second.” A roundup of recent mergers and acquisitions Date Property Pearls Review Description Online nursing certification and continuing education site Provider of research and analysis covering the contingent work force Provider of digital including photographs and Web graphics Seller Pearls Review Buyer Gannett Co. M&A ACTION 11/08 10/08 Staffing Industry Staffing Industry Analysts Crain Communications Inc. 10/08 JupiterImages Jupitermedia Getty Images n a keynote address at ABM’s Top Management Meeting last month in Chicago, John Suhler, co-founder and general partner of private equity firm Veronis Suhler Stevenson, reminded attendees that they are not alone in their current struggles. “I don’t care whether you’re talking about revenue, cost pressures, secular trends or the immediate weight on your shoulders caused by the downturn, all of you should feel very comfortable that you’ve got company,” he said. “Even though less than half [of the revenue] of businesses we own—and we own 32 active businesses today—is advertising or marketing driven, every one of these businesses is being confronted.” At the same time, Suhler said, his 30 years of experience investing in media and information companies has taught him that “the current liquidity crisis is certainly dramatic, but it’s not new and we will come out of it.” Referring to the latest VSS Communications Industry Forecast, Suhler noted that the b-to-b media sector is being affected less severely than some others by the steady migration of media spending to the Web. Worse off, he said, are newspapers, consumer magazines, broadcast and satellite radio, and broadcast TV. Nonetheless, Suhler urged ABM members not to be complacent. In addition to continuing to build their e-media and live event offerings to offset declining print revenue, b-to-b media companies should pursue opportunities in the large and fastgrowing sector of business information that is targeted at the “institutional end user,” he said. —Marie Griffin Troubled times call for changes I M&A Source: Jordan, Edmiston Group Transaction Database, 2008 mediabusinessonline.com | December 2008 | Media Business | 27 http://www.mediabusinessonline.com

Table of Contents for the Digital Edition of BtoB Media Business - December 2008

BtoB Media Business - December 2008
Contents
'Media Business' Picks Top Online Videos
Publishers in Several Sectors Brace for Rough '09
Looking for a Vendor? Check Out These Lists
M&A
Events
Online
Production
Circulation
People
Benchmarks
Despite Slowdown, M&A Deals Will Get Done

BtoB Media Business - December 2008