Investors may be returning to b-to-b
Jordan, Edmiston Group.
Richard Mead is managing director at media investment bank Jordan, Edmiston Group. In the following Q&A, he discusses his outlook for M&A activity in b-to-b media and exhibitions this year.
Media Business: Do you see more b-to-b media companies being sold this year compared with 2011? What is driving the sector or holding it back?
Richard Mead: There were few b-to-b media transactions in 2011, primarily because of b-to-b media companies' performance coming out of the recession and ownership structure. (Companies were) willing to wait for businesses to recover to enhance valuations and increase the number of buyers. 2012 appears to hold promise as a growth year for many b-to-b media companies, which should help investors make decisions on the timing of their exit, taking into account the time value of money and opportunity cost of hanging on for the last cent of value.
MB: Do you see b-to-b media companies making more purchases such as the one Penton made in buying EyeTraffic?
Mead: B-to-b media companies have built strong good will within their served communities, which they have served for many years. Still, they need to transform and re-energize their product portfolios, replacing struggling assets with more current products that are less cyclical in nature and, preferably, subscription-based. To acquire transformational businesses and launch new products, b-to-b media companies will need capital, which is in short supply.
MB: What impact if any will the financial restructuring of the big, private equity-owned b-to-b publishers have on the M&A market?
Mead: Much of the financial restructuring that has taken place over the past few years has involved financial institutions holding their investments. For example, the recent refinancing of Hanley Wood brought in equity capital as well as a restructuring of the debt. This is encouraging as it underscores that b-to-b media companies like Hanley Wood, with strong market positions and experienced management teams, can restructure their balance sheets and position themselves to move forward with growth initiatives. The U.S. business community in general needs a vibrant b-to-b media industry to support its strategic and marketing objectives, and that will require capital. Savvy investors should do well by backing the leading b-to-b media companies, provided, of course, that they maintain prudent financial discipline and continue to focus on transforming their business models.