Media M&A Slowing In Wake Of Credit Crunch

by Mark Walsh, Oct 31, 2007, 6:01 AM

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The mortgage crisis and resulting credit crunch haven't impacted valuations yet, but have led to a slowdown in media M&A activity, according to a group of top industry dealmakers.

Speaking Tuesday on a panel at the Future of Business Media conference in New York hosted by ContentNext Media, David Levin--CEO of the U.K.-based United Business Media--told conference-goers that while pricing of media deals hadn't changed recently, spillover from the mortgage meltdown has diminished the "volume and velocity" of dealmaking.

"Deals are getting stretched out and not completed as quickly," said Levin, whose firm has handled 43 mid- to-small acquisitions in the last two years.

Fellow panelist John Suhler, president of media-focused private equity firm Veronis Suhler Stevenson, agreed. But he added that pricing on large media deals--of more than $2 billion--would eventually be affected by increasing pressure from tightening credit markets.

Despite a frenzy of activity in the last two years, Suhler and other panelists said there is still ample M&A opportunity in the middle-market.

"The B2B media space is infinitely fragmented. There's a huge number of small companies still available," said Alan Meckler, chairman and CEO of Jupitermedia Corporation.

In pursuing deals, Meckler said he's usually considering 10 to 20 acquisitions at any time, and looks for companies that are profitable and aren't already being represented by third parties. "I feel you can make a better deal that way," he explained.

In the realm of newspapers, Steven Rattner, managing principal of Quadrangle Group, likened investments in the industry to "catching a falling knife" because of the inherent risks in having to turn around a declining business. The panelists--including former Merrill Lynch media analyst Lauren Rich Fine--concurred that the Tribune Co., which is on the block, would have a challenging time finding a buyer because of its razor-thin margins.

Regarding Rupert Murdoch's $5 billion acquisition of Dow Jones, they also agreed that the News Corp. chief was motivated by more than just financial considerations. "There's no way to make the numbers work because of the uncertainty of today's print market combined with how competitive the online world is," said Fine.

Meckler was more bullish, however, saying that The Wall Street Journal's "online assets alone will pay for that many times over, especially if they get rid of the subscription part."

On the future of The New York Times, Rattner said he doesn't expect it to be sold anytime soon. "The [Sulzberger] family has stated very clearly their belief that the ownership of The New York Times is a sacred trust they intend to maintain," he said.

Getting in the last word, Meckler opined on the outlook for Yahoo: "I think Yahoo has a very bright future, but they've lost the battle for search [to Google] and have to face that and move into other areas."

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