Given the activity that folk in the publishing and business information segment have seen in the past 12mths, it is no surprise that the numbers year on year look impressive. Two very active investment banks in our sector also publish annual reports on their views of the business. (Veronis Suhler also active in this space publishes a fat annual report which is sold so I didn't access it).
In their report presented in January The Jordan, Edmiston Group contended that there were 621 deals worth $57.3Billion in 2006 and 542 deals worth $54.0Billion in 2005. The JEGI report covers 11 media segments with Marketing and Interactive Services with 138 deals and Online media with 174 deals leading the way. A short synopsis of each segment and the notable deals for each is also presented in the report. By way of forecasts, they only project what they expect to see happen in the trade show space which increased in the number of deals between 2005/6 but saw a decrease in the value of total deals. (In each of their periodic reports they pick a segment to forecast and more of these past reports are on their web site).
Desilva and Phillips has also done considerable business in the past year - by their own admission more than their pessimistic 2005 forecast - and while the numbers are again different from those above they do show impressive growth. From Desilva and Philips 2006 Market Report there were 151 deals worth $20.5Billion in 2006 and 115 deals worth $6.0Billion in 2005. They do take a look into the future:
Just as the economic outlook continues – even improves – in 2007, we see a continuation of a great deal market. We expect the number of deals and the dollar volume to continue – at least – at the record level of 2006. We are also aware of a very full deal pipeline. We expect to see more public companies going private, just as Reader’s Digest did – and it’s not just Sarbanes-Oxley. As we’ve seen, media executives now know that they need to transform their companies into platform-neutral content enterprises combining strong traditional and new-media distribution channels. But to do this makes it even more difficult to manage earnings from one quarter to the next, as the public markets demand. One result: the solution offered by buyout firms looks ever more attractive.
The outlook for M&A in 2007 is as good as we’ve ever seen. All the pieces are in place: availability of funds, favorable interest rates, eager buyers without the time to build rather than buy, brands that need to find new delivery platforms, and a regulatory climate that all but deliberately discourages new companies from going public and existing public companies from controlling their own fates. There is yet another population of buyers perhaps waiting in the wings – European media businesses newly flush with a strong Euro and, finally, thriving domestic markets. To say we’re looking forward to the excitement is an understatement.
No matter how the numbers are tabulated, given the activity already announced at the tail end of 2006 and the first quarter of 2007 it is hard to see 2007 not being a banner year for M/A activity in the media space. Already Wolters Kluwer education has gone for over $1.0billion, Veronis (Private Equity) has purchased Advanstar for over $1.obillion and Houghton Mifflin has been purchased by Riverdeep. In the wings are expected $4-5Billion deals for Thomson and Harcourt and $1.0billion for Bureau van Dijk. If Pearson or Reed are gobbled up by PE then it really will be a banner year.
There is a key comment in the above forecast which studiously points out that some very big and seemingly sophisticated media companies still have a lot to do to re-make their companies into 'new-media' content providers and not print companies. Five years hence the companies purchased by private equity will burst forth into the public markets in almost unrecognisable form having gained the flexibility to transform their companies into true online and new media players.