With the credit crunch causing uncertainty across all industries, ContentNext editor and publisher Rafat Ali spoke with a group of media dealmakers at the Future of Business Media Conference. While changing market conditions are obviously an issue, it’s just a part of the overall picture. Across the media landscape, there are a number of other considerations and opportunities for both strategic and private equity buyers.
— Valuations and the Credit Crunch: As of yet, the credit crunch has produced no big changes in valuation, but changes in volume and velocity, according to David Levin, CEO, United Business Media. John Suhler, president of PE firm Veronus Suhler Stevenson, concurred, noting that the large transactions are feeling stress due to the credit markets. Eventually price will be affected, but that hasn’t shown up yet. In the lower middle market, there hasn’t been much change in volume or ability to arrange financing.
— Newspaper Deals: Other than Dow Jones/News Corp., (NYSE: NWS) the other big deal in the newspaper space is the pending acquisition of Tribune. The difference between the two deals is telling. Media analyst Lauren Rich Fine pointed out that the Tribune deal is predicated on razor thin margins, whereas Dow Jones and News Corp. are both in places of strength. Thus, completing the Tribune deal is still a challenge. Quadrangle Group CEO Steven Rattner likened newspaper investing to “catching a falling knife”, adding that you don’t want to do that unless you’re sure it can be turned around.
— Big Opportunities in Business Media: Levin: There are plenty of small deals out there. “B2B media space is infinitely fragmented, huge number of companies still available.” Alan Meckler, CEO, JupiterMedia, said his company is at any one time looking at 10-20 acquisitions of various prices. After Jupiter bought MediaBistro, every entrepreneur out there thought they could get the same money, which has become a challenge for the company when doing deals.
— Private Equity: Steven Rattner discussed the fact that private equity is always, in a sense, at a disadvantage to the strategic buyer. Private equity firms can’t justify the prices that strategics often can — Dow Jones is a prime example. “This was a deal of passion, not of spreadsheets.” Lauren Fine agreed that the numbers aren’t there to justify the price paid for Dow Jones. On the other end, as John Suhler noted, private equity can’t justify too many smaller deals, since they take up just as much time and oversight as the big ones. Another interesting aspect of this discussion was the meaning of ‘platform’ to a private equity firm. Alan Meckler pointed out that for a private equity firm to do a small deal efficiently, it needs to have assets that serve as a platform for smaller deals.
— New York Times: Rattner: “The family has stated clearly every step of the way their belief that their ownership of the New York Times (NYSE: NYT) is a sacred trust that they intend to maintain… The New York Times will remain in its current ownership form for the indefinite future.”
— Yahoo/Newspaper Partnership: Fine believes the partnership will help newspapers in certain areas, particularly with respect to strategy, but “(she doesn’t) ultimately feel it’s going to move the needle that much.”