The opening panel of The Deal’s Convergence 2.0 conference at the Paley Center for Media in Manhattan started off as a conversation about major media conflicts (new media startups vs. rights holders, cable vs. telcos), but it quickly turned to the rapidly changing market. As Steven Price, director at PE firm Centerbridge put it, the private equity market market for media deals has gone form “hard to harder” in the past month and a half. Whereas last year, private equity firms were in brutal competition with each other to win deals, now they can’t get financing for the deals they do find. When an opportunity does come up, sellers aren’t willing to sell at the latest market prices.
And yet the media market isn’t as bad as some others. Joshua Steiner of the Quadrangle Group noted you can still make money when you approach the market strategically. If you see a company that could benefit from better management or a more focused strategy, then deals can still be lucrative. He cited his own company’s purchase of Dennis Publishing (publisher of Maxim magzine) as an example of this. What’s more, as UBS’ Jeffrey Sine pointed out, there’s a lot of fresh money coming in from places like the Middle East and China — but again, they key is that sellers need to adjust to the new reality. Private equity firms aren’t going to bid up assets to the same valuations as they did last year. Basically, there should be more to private equity than simply cheap credit, low taxes and a friendly regulatory environment.
Following this initial panel was a keynote from PE veteran Leo Hindery, once part of John Malone’s team and founder of the YES Network, now at InterMedia. Hindery listed the three necessary ingredients for profitable media investments: strong top-line growth, high barriers to entry and good management. Hindery got a chuckle from the audience when he argued that new media deals shouldn’t automatically be handed off to the younger members of the firm — the veterans who know how to study a firm and analyze business should be active in these deals. Underlining the need for high barriers to entry, he cited Warner Music, a well-run label suffering because anyone can get access to its content.
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