 |
|
|
12x Train Departing: B2B Media M&A Deals
are Helping the Strong Become Stronger |
|
|
|
|
|
|
|
21 August 2006 |
|
|
|
|
It's still a hot market for mergers and acquisitions in
publishing today, especially for companies that have picked
out profitable niches and built strong relationships with
their audiences. But it's clear that the deals of 2005 are
not the deals of 2006. Where last year portfolios were
being trimmed and fattened left and right this year is
seeing aggressive multiples rewarded only to those
companies that have defined diverse paths to profits that
will fit in with increasingly sophisticated and demanding
audiences. Getting 12x cash flow is not unheard of these
days, but be prepared to be examined carefully for how your
products and services deliver on many levels. |
|
The market for media mergers is
hot, riding a wave of healthy ad and subscription revenues
that's favoring many consumer and B2B media companies. As
noted by FOLIO: Magazine recently the
Jordan, Edmiston
Group has more than doubled its deal count to date this
year, indicative of similarly healthy returns from M&A
specialists. The golden benchmark for many of these deals is
the magic number 12, that is, twelve times cash flow, a number
that has been met and bettered in many key deals this year. The
financial optimism leading to this kind of robust multiple
focuses especially on the B2B sector, where a combination of
stable print demand for trade magazines, growing online
sophistication and a healthy mix of ads, subscriptions and
events revenues offers buyers reason to smile about the future
of publishing.
But the market for M&A deals for media companies has not
been a completely smooth road this year. As
noted by Reuters the sale of
CurtCo Media
Labs, which produces high-flying niche publications such as
"Worth" and
"The Robb
Report," failed to gain the bids that CurtCo had hoped for,
as did
Advanstar's foray into M&A markets. As we had noted in
our Outlook 2006 report earlier this year much of the easy
money in M&A was made in 2005 in a huge spate of portfolio
shuffling that would leave fewer places for deals to land for
sellers in 2006. In short, for those who had waited for this
year thinking that selling out would be a shoo-in the
environment has not proven to be that simple. There are buyers,
all right, but they are looking for particular points of value
to drive deals forward. While there appears to be a broad array
of opinions in M&A circles as to what those key virtues are,
they seem to center on a few key components:
- Publishers that provide integration value. Being
able to reuse content in multiple venues to service audiences
better is a crucial factor for commanding top dollar in
today's media M&A marketplace, especially in B2B markets.
Print is still providing a solid platform of revenues in B2B
markets from executives who have the luxury of time to get
perspective, but being able to get content into
mission-critical applications takes a publisher's portfolio
to a higher level of value. Looking at
United Business Media's acquisition of
Commonwealth Business Media it's properties like
Commonwealth's
PIERS comprehensive database of cargo shipping statistics
that add the multiple factors to its portfolio of magazines,
directories, references, newsletters, and online services.
When looking at your own assets, it's worth asking whether
you have value-add in your own portfolio that centers around
being essential to your audience's daily work.
- Publishers that have more than just a niche.
Certainly specialty magazine publishers have been doing
better than more broad news titles in the M&A wars as of
late, but it's clear that having just a niche or a B2B mix is
not going to turn the tide for those extra "Xes" in
dealmaking. There are fine titles with strong print bases
that have relied on traditional audiences too long to make a
strong jump to a more diversified offering, including, but
not limited to, contemporary online offerings. This doesn't
preclude dealmaking, but it limits the points of effective
growth that will lead to high cashouts. This is not to say
that publishers aren't pursuing straight title acquisitions:
John Wiley & Sons' announcement of new titles for
clinical cardiology and scanning microscopies provides an
excellent example of traditional peer-reviewed journals that
are deeply tapped into leading technologies and that lend
themselves to further technical publishing adaptations. Go
for niches, yes, but go for titles that are readily adaptable
for high-value products and services.
- Publishers that build high-touch relationships with
their audiences on many levels. Yes, print does still
matter, but it's just one of many types of publishing assets
that provide a way to create tangible relationships with
audiences. The point is not the presence of a venerable print
title as much as what a publisher is doing with it to give
their audiences a tangible experience with a publication's
brand. The rise of print titles growing out of online
publications is testimony to the use of print to provide a
high-touch experience that complements other publishing
assets rather than as the be-all and end-all of a
relationship. Successful events operations also allow
publishers to add depth to audiences' appreciation of a
title's brand, but here again the presence of an event is no
guarantee that there is strong synergy between the title and
the proceedings that will result in accelerated revenues.
Look for publishers that are adept at building communities on
may levels of sophistication to create deep loyalty to
products and services. Similarly, think about how content
integrated into workflows and into indispensable desktop
tools provides not just functionality but a relationship with
a publisher that is both tangible and not easily replaced.
The strong publishers that have worked through most of the
lower-grade portfolio acquisitions in 2005 at lower overall
prices are able now to pick and choose more finished
acquisitions in a hot market that will still make a difference
in earnings. Of course the other side of strong publishers
being able to spend mostly on the cream of the crop is that
those who had hoped to cash in at the top of the market are
either missing the train or hopping on board with a certain
degree of disappointment and reluctance. Small to medium
publishers that have lagged in their plans to diversify their
appeal to audiences need to step up to many of the painful
decisions that larger publishers have had to absorb over the
last few years to catch up with audiences that demand
diversified relationships with their publishers. The good
news: there's a good amount of growth left in this market that
can be used to fuel this change. The bad news: many publishers
are still asking for directions to the 12x train station.
-
John Blossom
To top of
page
 |
