Media and Information Industry M&A Volume Rises

Posted on July 18, 2001

Buyers spent $12.7 billion to acquire 145 media and information industry properties in the three months ended June 30, 2001, a 17 percent increase over the 124 mergers and acquisitions in the year earlier period, according to a report from media and information industry investment bankers The Jordan Edmiston Group, Inc. (Jordan Edmiston).

Number of Media and Information Industry M&A Transactions By Quarter

Source: The Jordan, Edmiston Group, Inc.

``M&A activity in the media and information industry has rebounded in the second quarter of 2001 and we anticipate that this upward trend will continue into the second half of the year,'' said Wilma Jordan, CEO of Jordan Edmiston and JEGI Capital.

Focused on cutting costs and increasing cash flow from existing core assets, many strategic media companies acquired assets related to their core properties while shedding non-core assets. Companies with three or more announced deals in the first half of 2001 included Advance Publications, dmg world media, Penton Media, Primedia, Pulitzer Newspapers, Taylor Nelson, Thomson, Transwestern Publishing and Wolters Kluwer.

Top 10 Media and Information Industry M&A Transactions in the First Half of 2001

>Source: The Jordan, Edmiston Group, Inc.

The impact of the current business-led slowdown is evident in the ten largest media and information M&A transactions during the first half of 2001. No business-to-business deals made the top 10 list, although M&A activity in the trade show and conference sector doubled over first half 2000 levels. Consumer directory, professional and educational book and consumer special-interest magazine publishing sectors accounted for the top six deals. Each of these sectors has been insulated from the ongoing economic slowdown, in contrast to the sharp swings in advertising that have impacted business-to-business and general-interest consumer media and information industry companies. ``Many consumer-oriented businesses are still seeing reasonably strong demand,'' said Jordan Edmiston Chief Operating Officer Bill Hitzig. ``Even though most special-interest consumer publications are dependent on advertising, their ad page levels have declined less than they have for B2B publications.''

Demand Remains Strong for Consumer Orientated Publications

M&A activity in the consumer magazine sector in the first half of 2001 has mainly involved special-interest properties, a reflection of the growing demand in the media marketplace for products that target individual interests and generate a loyal following.

Strategic acquirers were responsible for the top three announced consumer magazine deals of the first half of 2001 - Primedia's acquisition of EMAP USA, publisher of Motor Trend, Guns & Ammo, Hot Rod and Skin Diver magazines, for $515 million; Advance Publications' acquisition of The New York Times Company's magazine group including Golf Digest and Golf World; and AOL Time Warner's acquisition of Imagine Media's Business 2.0 new economy magazine for $68 million plus contingent payments based on future revenues.

Consolidation Drives M&A Activity in the Internet Media Sector

Internet media companies no longer have ``overvalued'' equity with which to buy assets or enter new markets, but they face a strong imperative to consolidate to ``survive'' in the marketplace. INT Media Group, iVillage.com and CNET Networks have turned their strategic focus to gaining market share. Vertically focused and proprietary-content websites have become the most sought after Internet properties as the value of broad-based websites with large page view and unique visitor numbers has diminished. Acquisition-minded media c ompanies such as Primedia, Vivendi Universal, TMP Worldwide and Martha Stewart Living Omnimedia have consolidated their leading category positions across multiple media platforms. M&A deal volume and dollar value in the Internet online media sector declined 25% from 89 to 67 deals and 68% from $16.9 billion to $ 5.5 billion in the first half of 2001.

Activity Slows as Second Shakeout Looms Over the Book Publishing Sector

With the shakeout among retail bookstores of a few years ago still a vivid memory, many book publishers are cutting their operating expenses in response to the growing quantity of unsold books returning from bookstores. Total deal volume in the consumer book-publishing sector declined from 18 to 7 deals in the first half of 2001. Deal value declined 79% to $208 million from $1 billion in the first-half of 2001. ``In the last few years, soaring sales at online bookstores have led book publishers to raise growth expectations and target publishing properties with strong backlists,'' said Hitzig. ``Now, growing return levels are giving many publishers a harsh dose of the new reality.''

Strategic Acquisitions in Contiguous Markets Fuel Increased Newspaper Deal Volume

Despite a decline in operating performance, the newspaper publishing sector witnessed 45 deals in first half 2001, nearly double the number in the first half of 2000. At the same time, the aggregate deal value declined to less than $500 million from over $11 billion in the first half of 2000, when a handful of multi-billion dollar acquisitions, including Tribune Company's $5.2 billion purchase of Times Mirror, were completed.

A number of newspaper publishers continued to acquire new websites to complement their existing online and offline offerings. However, almost two thirds of the M&A activity initiated by newspaper publishers involved the acquisition of weekly newspaper chains, as newspaper owners sought to improve their performance by capitalizing on economies of scale and improved market efficiencies. Active acquirers included many of the industry's leading publishers, including Community Holdings, Herald Media, Journal Register Company, MediaNews Group, Ogden Newspapers, Pulitzer Newspapers and Rust Communications.

Business-to-Business Magazine M&A Activity Declines by 30 Percent

In the trade magazine sector, M&A deal volume fell 30 percent to 16 deals while deal value declined 29 percent to $169 million in first half 2001. Strategic media companies were the most active buyers. By targeting `bolt-on' acquisitions, diversified media companies such as Penton Media and Cygnus Business Media were able to enhance their core market positions. Cahners Business Information and Thomson Corporation were active in divesting non-core business-to-business trade publishing assets. In contrast, during the first half of 2000, there were 23 M&A deals valued at $237 million. One of the reasons for the decline in trade publishing M&A activity is the shift in focus by business-to-business media companies to the acquisition of other types of media, including trade shows, conferences, databases and online information products and services.