M&A for Advertising, Marketing Services and Interactive Firms Down but not out, Finds AdMedia Partners Survey

Despite discouraging economic climate, 60% of respondents expect to be involved in M&A deals in 2009, modest decline from last year when 67% anticipated doing so

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New York, NY (PRWEB) January 29, 2009

AdMedia Partners, a leading M&A advisor, today announced the findings of its 15th annual survey of senior executives at leading advertising agencies, marketing service and internet marketing firms on prospects for industry mergers and acquisitions in the year ahead. Even with a troubled economy, 60% of respondents expect to be involved in M&A deals in 2009, only a modest decline from last year when 67% anticipated doing so.

"This outlook appears to reflect both consolidation opportunities for smaller agencies with cutting-edge business models or strategic client relationships and game-changing opportunities for larger agencies to merge in order to gain critical mass and reshape the agency landscape," said Seth Alpert, a Managing Director of AdMedia Partners.

The web-based survey of more than 3,700 domestic and international advertising, marketing services or Internet marketing services executives and private equity investors was conducted by AdMedia Partners in December 2008. The Merger and Acquisition Prospects for Marketing Services and Internet Marketing Firms is one of two highly regarded surveys produced annually by AdMedia Partners. The second survey, Prospects for Media Mergers and Acquisitions, was widely released earlier this month.

The survey was done amid a growing awareness that economic conditions in 2009 would be as difficult as any year in memory. Though unanimous that a recession is under way, respondents were outspoken that the downturn would inevitably create unique opportunities for buyers and sellers, especially those companies with innovative business models in emerging marketing and media.

Respondents expect overall advertising spending in 2009 to decline by five percent, impacting both independent agencies and large holding companies. Many newer agencies, especially online firms, are finding themselves at a critical juncture as the validity of their business model, strength of their management team and overall financial wherewithal are being severely tested, most for the first time. Notwithstanding these challenges, respondents expect five percent growth in interactive advertising spending as well as five percent growth in their own businesses.

Volatile financial markets will continue to affect the universe of buyers. One-third of respondents expect M&A by strategic buyers to be up in 2009, versus more than two thirds in last year's survey. Publicly held marketing communications companies have seen their valuations cut nearly in half over the past six months, hindering their ability to be aggressive in the M&A marketplace. At the same time 14% of respondents predict industry M&A by financial buyers will grow in 2009, in contrast to 41% last year. The majority of financial buyers have been sidelined by frozen credit markets; however, a number of private equity players are sitting on large cash reserves, positioning themselves to act on attractive deals, albeit using less debt and more of their own equity.

Easing off the record valuations reached in 2007 and 2008, respondents expect valuations to soften in 2009: 5x EBIT for advertising agencies (the one group with consistent multiples over the last several years), 5x EBIT for marketing services firms (versus 6 6.5x last year), and 6-7x EBIT for digital marketing agencies and digital marketing technology companies (versus 7-8x last year).

"So while the year ahead may not be remembered for record-breaking M&A volume or lofty valuations, nimble buyers - both strategic and financial - are sure to find suitable investment opportunities that will help them weather the downturn and be positioned for strong growth once the economy picks up, with a new, more accountable marketing mix model likely emerging. Likewise, sellers with a desirable mix of digital and traditional services and attractive financial results will potentially find opportunities to align with financial and strategic partners who can provide resources for accelerated growth in the years beyond 2009," said Alpert.

To access a free copy of the 2009 Merger and Acquisition Prospects for Marketing Services and Internet Marketing Firms, please visit the AdMedia Partners website at http://www.admediapartners.com.

About AdMedia Partners

AdMedia Partners is a leading M&A advisor that provides middle market mergers and acquisition advisory services to digital and traditional media, marketing and information businesses. Founded in 1990 and located in New York City, the firm has completed over 150 transactions worth over $5 billion since 1999.

Merger and Acquisition Prospects for Advertising, Marketing Services & Internet Marketing Firms is one of two highly regarded surveys produced annually by AdMedia Partners. The second survey, The Prospects for Media Mergers and Acquisitions was released in early January and is now available at http://www.admediapartners.com.

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Contact

  • Seth Alpert
    AdMedia Partners