B2B Media Merger and Acquisition Activity to Continue in 2006

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AdMedia Partners, New York investment bank specializing in middle market mergers and acquisitions, conducts 2nd annual survey at ABM Top Management Meeting

AdMedia Partners, a New York investment bank specializing in mergers and acquisitions advisory services to the marketing communications, media, interactive and information services industries, today revealed the results of its second annual Top Management Snapshot Survey conducted at the recent ABM Top Management Meeting in Chicago, IL.

The ABM Top Management Meeting is an annual conference for key executives involved in business-to-business (B2B) media. Close to 200 top managers attended the event in November. The survey provides an overview of expectations for B2B mergers and acquisitions in 2006 based on the opinions of the actual decision makers in the industry.

The 2006 Outlook

Looking ahead to 2006, ABM respondents expect business-to-business merger and acquisition activity to deliver another robust year. In fact, 62% characterized their intentions as being buyers in 2006 and 22% as sellers, while only 20% said they would be inactive. (A small number of respondents indicated both buying/selling intentions).

In regards to magazine transactions only, 53% described their company’s merger and acquisition intentions as being buyers of magazines in the upcoming year, while 19% described their intentions as being sellers, as opposed to 68% and 10% last year, respectively. In events, 51% said they would be buyers, while 10% characterized themselves as sellers and 39% planned to be inactive. This is not significantly different from event intentions in 2005.

Not surprisingly, companies that were active last year plan to remain active in 2006. In fact, 100% of those active last year looked to be either buyers or sellers of magazines or events in the coming year. More specifically, of those active last year, 81% indicated interest in being buyers, while 29% said they would be sellers (with a portion of respondents indicating overlapping interest as both buyers and sellers of magazines or events). Of respondents who were inactive last year, 58% indicated their company would become active as buyers or sellers of magazines or events in 2006, while 42% will continue to remain inactive.

Price expectations for 2006 are slightly more bullish than in 2005 for both magazines and events.

In 2005, respondents said they would be comfortable buying magazines at 6.1 and selling at 7.8 times EBITDA, and would be comfortable buying events at 6.3 and selling at 7.9 times EBITDA. (As always, there is a modest spread between the multiples at which respondents would feel comfortable buying and selling properties, reflective of the natural arbitrage companies hope to recognize on transactions.)

In 2006, respondents said they would be comfortable purchasing magazines at an average price of 7 times EBITDA and selling them at a multiple of 8.7, a 15% and 12% increase over 2005, respectively. They would be comfortable buying events at an average price of 7.7 times EBITDA and selling at a 9.4 multiple, a 22% and 19% increase over 2005, respectively.

When questioned regarding the single most significant factor that will impact next year’s magazine and event prices, 69% of the open-ended responses referenced interest rates and the ready availability of capital. This overwhelming response acknowledges the significance of Fed policy and the fragility of credit markets in keeping the merger and acquisition market active and prices at historic highs.

Overall, results indicate positive expectations for a healthy, robust year in B2B merger and acquisition activity. Market participants are looking to be active and both buyers and sellers are expecting transactions with higher EBITDA multiples. As respondents indicated, however, activity will be largely contingent on interest rates and the availability of capital in 2006.

2005 Revisited

As expected from last year’s survey, 2005 was a very active year for mergers and acquisitions among ABM members. 47% of respondents participated in a transaction in the past year, as either a buyer or seller. Compared to the first survey, which revealed results for 2004, the average reported transaction multiple of trailing twelve months EBITDA was down 9% for magazines, from 6.5 to 5.9, and up 13% for events, from 6.8 to 7.7 in 2005. These multiples suggest that most of the transactions were portfolio management transactions, the acquisition or divestiture of individual business units, and not larger platform transactions that command significant premiums. Most of these smaller transactions between private parties go unreported.

About AdMedia Partners

AdMedia Partners (http://www.AdMediaPartners.com) is a leading boutique investment bank that provides middle market mergers and acquisitions advisory services to advertising and marketing services, media and publishing, and related internet businesses. Founded in 1990 and located in New York City, the firm has completed over 100 transactions since 1999.

Transactions completed by AdMedia Partners in the last six months include:

  • Representing Linda Ligon, owner of Natural Home & Garden magazine, in the sale of the magazine to Ogden Publications.
  • Representing Federalist Group, a Washington, DC based government relations firm, in its acquisition by Ogilvy Public Relations Worldwide, a unit of WPP Group.
  • Representing Grupo Editorial Expansión, Mexico’s second largest magazine publisher, in its acquisition by Time Inc., a subsidiary of Time Warner.
  • Representing Gruner+Jahr USA in its sale of Inc. magazine and Fast Company magazines to Mansueto Ventures LLC.
  • Representing Dynamic Logic, the leading independent marketing research company, in its acquisition by Millward Brown, a unit of WPP Group.
  • Representing Taylor Rafferty, an independent global investor relations and financial communications advisor, in its sale to Xinhua Finance, China’s premier financial services and media company.
  • Representing Interweave Press in its acquisition by Aspire Media, a newly formed magazine entity backed by private equity firms Frontenac Company and Catalyst Investors LP.

If you have any questions regarding this survey, or any other media M&A topics, please contact AdMedia Partners:

Mark Edmiston

Managing Director, AdMedia Partners

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Mark Edmiston
AdMedia Partners
212-759-1870
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