2014 was a major year for M&A in the US B2B media sector. After several years of private equity (PE) owners and lenders finding themselves (in some cases) under water with their pre-Great Recession investments in the sector, the tide has turned Last year saw a new crop of financial and strategic buyers who have decided to pick up assets and wade into the sector.
Key transactions include:
- Asset International to Genstar (PE)
- ALM Media to Wasserstein & Co. (PE)
- SourceMedia to Observer Capital (PE)
- Questex to Shamrock Partners (PE)
- Cygnus Media to SouthComm (Corp)
- Summit Professional Networks to ALM Media (Corp)
- Advanstar to UBM (Corp)
What has driven this renewed interest in the sector?
- Many B2B media companies have successfully furthered their transition from print. Although they have not recovered the revenue lost from print advertising, they now have a higher proportion of their current mix from more attractive media such as digital, events and custom publishing
- B2B media retains a fundamentally strong value proposition in terms of connecting vendors with key niche market buyers. In a stronger economic environment, marketing budgets increase and the tide lifts all boats. Certain markets have gotten healthier (e.g., financial industry), which has made some of these assets more attractive – such as Asset International, SourceMedia, and Summit
- The reality of the PE markets is that there is too much money chasing too few deals. Although B2B media has stung PE in the past, the assets remain quality and it was only a matter of time before they were acquired by funds that need to deploy capital
In this buying cycle, certain interesting trends have emerged: divestments, corporate acquisitions and higher valuations for some assets
- B2B media shedding trade show portfolios to unlock value and create easier conditions for sale. Example – Summit sold off INDABA to Euromoney, Cygnus sold off a few of its trade shows before SouthComm bought the rest of the assets and Hanley Wood divested trade show assets to Informa (though its financial sponsors retain the media assets). Given the higher valuation multiples of events vs. media, separating the businesses allowed buyers to purchase what they wanted at a valuation they could support
- Corporate acquisitions – Summit and Cygnus. ALM buying Summit is particularly interesting as it represents their first major adjacency step out. The industry has been looking for a consolidator for years and it will be worth watching further developments
- Higher valuations have accrued to those with more attractive business models – ALM and Asset International with their higher percentage of print, digital or data subscriptions recently achieved higher valuations than media companies with more typical controlled circulation models
Key questions for 2015 and beyond
- What will happen with some of the sizable platforms that are also ripe for sale – Penton, NewBay, Hanley Wood. Will owners capitalize on the recent wave while the good times last?
- Could we expect further industry consolidation in the future to build scale and realize efficiencies? ALM and Penton are the clear high potential platforms
- Now that B2B media has a fresh start, will new financial sponsors begin to open up wallets for product development, expansion, talent and infrastructure, to build value over their hold period – e.g., Northstar under Wicks Group of Companies have expanded into international and e-commerce
To discuss how AMR can help your company develop growth strategies please contact Denzil Rankine.