• by October 13, 2000

By Anya Khait

As media planners are gearing up to update the stacks of media kits on their desks with 2001 editions, the new prices, especially when it comes to magazines, may have a lot more to do with mergers and acquisitions than with rate base increases.

Buyers spent $6.2 billion to acquire 35 media publishing and exposition industry properties in the last quarter, more than five times the $1.2 billion they spent to buy 27 businesses in Q2 of 2000 and nearly four times the $1.7 billion they spent to buy to 42 properties in Q3 of 1999, according to a report from investment bankers The Jordan, Edmiston Group (JEGI).

The momentum is coming from the deepening pool of buyers - private equity firms, diversified global media companies, cashed out entrepreneurs and, of course, all those media companies in the hunt for strategic add-on acquisitions to complement their existing publishing, exposition or online assets.

"Last quarter the demand for media properties with strong financials, well-prepared documentation and a proven customer base was stronger than many observers expected," said Wilma H. Jordan, Founder and CEO of JEGI. "Buyers managed to shake off the effects of rising interest rates, falling stock prices and slowing economic growth as quality companies continued to sell for good - and sometimes even great - multiples of revenue and EBITDA."

Prices for magazine publishing and exposition properties accelerated last quarter, as the median non-weighted EBITDA trailing twelve months (ttm) enterprise value multiple increased to 11.2x from 10.8x in the year-earlier quarter and the non-weighted median revenue ttm enterprise value multiple rose to 3.0x from 2.4x in the third quarter of 1999.

Another factor contributing to last quarter's acceleration in deal multiples is the greater number of contingent payments offered to sellers upon reaching certain predetermined revenue and EBITDA goals.

"We were able to help First Conferences, in the sale of Streaming Media to Penton, and Duke Communications, in its sale to Penton, realize tremendous upside opportunities by incorporating an earnout as a portion of the total consideration paid," noted Jordan.

"We expect buyers will continue to have a high number of attractive media companies to choose from as strong deal prices bring more quality businesses onto the market," said Jordan.

"And we continue to expect a strong M&A showing in the second-half of this year as these quality businesses continue to command premium prices."

Interest in mergers as an exit strategy for magazine publishers faced with online and trade show competition remains strong. A number of closely held private entrepreneurial companies were sold to strategic and private equity-backed media companies last quarter.

"Traditionally, most magazine entrepreneurs have at some point in their careers considered selling out to a larger or better-funded competitor," stated Bill Hitzig, COO and Executiv