Media and Information Industries M&A Market Sets New Highs With 399 Transactions, Totaling $76 Billion as Tracked by The Jordan, Edmiston Group
Monday, 02 July 2007
The media and information industries M&A market set new record highs with 399 transactions announced totaling $76 billion deal value in the first half of 2007, as tracked by The Jordan, Edmiston Group, Inc. (JEGI), the New York-based investment banking firm, across 11 media and information sectors. This first-half tally exceeds the total 2006 deal volume of $60.6 billion by 25 percent.
Continued Strength in Online Media & Marketing Services M&A
The marketing services and online media sectors dominated the action, together accounting for 238 transactions valued at $32 billion, or more than half of all media and information deals and over 40 percent of total deal value. Online media and marketing services M&A exploded in the first half of 2007 with blockbuster deals, as well as a strong flow of middle market transactions. First half transaction value of $31.8 billion has already surpassed full-year 2006 results in these sectors by 20 percent.
Major announcements in the second quarter of 2007 included Microsoft’s acquisition of aQuantive for $5.7 billion, Google’s acquisition of DoubleClick for $3.1 billion, and the acquisition of 24/7 Media for $649 million by WPP. In all, the top 10 online media and marketing services transactions in the first half of 2007 totaled over $24 billion, accounting for 77 percent of total deal value for these sectors. The top 10 online media and marketing services transactions accounted for approximately 33 percent of total deal value across the media and information industries. Additionally, the top five online media and marketing services transactions were among the 10 largest media and information industry transactions overall.
However, many of the most interesting deals fell below the “headline-grabbing” levels, as major diversified media companies continue to reshape core models through acquisitions, and well-funded investors pursue new sources of growth. JEGI assisted with several such transactions in the second quarter, including arranging a $50 million investment for Gorilla Nation Media, the largest online advertising rep sales firm, from Great Hill Partners; the sale of Healia, an innovative heath search engine, to Meredith Corp; and the sale of TechnologyGuide.com, a provider of Internet content sites for mobile technology products, to TechTarget.
According to Tolman Geffs, a managing director with JEGI, “There is a lot more consolidation ahead. There isn’t such a thing as old media anymore. There’s only diversified media. Every major media company is working hard to reshape their distribution model to reach new audiences, and that’s going to take years to pan out. Plus, you have an ocean of ad dollars moving from non-digital to digital.”
The story behind the story is the pressing need for greater efficiency of digital advertising delivery. There is a tremendous demand for “nuts and bolts” companies that improve the deployment, performance and cost effectiveness of online advertising. This in turn drives M&A, as larger companies assemble end-to-end digital ad management solutions by acquiring smaller outfits, much as DoubleClick and aQuantive had done before being acquired by Google and Microsoft, respectively.
Strong M&A Financing Environment
The lending climate for the media and information industries continues to be very positive, and lending multiples have strengthened over the past six months. Private equity firms continue to actively pursue acquisitions, especially as add-on opportunities for their existing portfolio companies, where they find they can complete larger acquisitions with minimal, if any, new equity investment. “The deal environment has been on a tear for the last three years and will continue to be on a tear through 2007.
Private equity has truly been driving most of the M&A activity fueled by a frothy debt market,” said JEGI Managing Director Scott Peters, during his interview with Maria Bartiromo on CNBC’s Closing Bell (see the complete interview at: http://www.jegi.com/section.asp?sectionTitle=IndustryReports).
Other Key Sector Performances
Business-to-Business Magazines
Led by the $1.1+ billion acquisition of Advanstar by Veronis Suhler Stevenson, the business-to-business magazines sector surpassed first half 2006 levels in first half 2007 by 14 percent in number of deals and 13 percent in deal value. Other noteworthy second quarter b2b magazine transactions included Ziff Davis Media’s sale of its Enterprise Group to Insight Venture Partners, the acquisition of Wicks Business Information by Summit Business Media and the acquisition of True North Custom Publishing by Sunshine Media.
Consumer Magazines
M&A activity was robust for the consumer magazine sector in the first half of 2007, as deal activity increased 19 percent and deal value more than tripled to over $2.7 billion. Accounting for more than half of total deal value were two high-profile transactions in the second quarter: Primedia’s sale of its Enthusiast Media division to Source Interlink Companies for $1.2 billion; and the sale of Dennis Publishing to Quadrangle Group for a reported $250 million.
Database Information Services
The database information services sector saw fewer, but much larger, transactions in the first half of 2007 versus the first half of 2006. Deal value exploded with the largest announcement of the first half: Thomson’s $18+ billion planned acquisition of Reuters Group. Other noteworthy second quarter transactions included Informa’s acquisition of Datamonitor for over $1 billion.
Educational & Professional Publishing
The educational and professional publishing sector is having a very healthy year, with 16 completed transactions valued at more than $10 billion. Noteworthy second quarter transactions included the second largest deal of the year – Thomson’s sale of Thomson Learning and Nelson Canada to Apax Partners and Omers Capital Partners for $7.75 billion, as well as Wolters Kluwer’s sale of Wolters Kluwer Education to Bridgepoint Capital for over $1 billion, and Reed Elsevier’s sale of Harcourt Education to Pearson for nearly $1 billion.
Exhibitions & Conferences
For the first half of the year, deal activity was up significantly in the exhibitions and conferences sector, increasing 46 percent over first half 2006 levels. However, transaction value decreased, as there were no large scale deals in this sector in the first part of the year. Several noteworthy consumer event deals took place in the second quarter of the year, including an investment by Guggenheim Partners in Festival Network, the $37 million acquisition of AVP by Shamrock Holdings, and Expomedia Group’s $32 million buyout of Homebuyer Events.
For the complete release with charts and tables, please visit http://www.jegi.com/docs/Press_07-02-07.pdf.