• by April 3, 2002

The majority of media executives, optimistic about a rebound in ad spending, expect the media Mergers & Aquisitions marketplace to improve this year as well, according to an annual survey conducted in December 2001 by New York investment banking firm AdMedia Partners.

AdMedia President Robert Garrett noted that all but 10% of media executives predict that ad spending will bounce back before the end of 2002, with the majority hoping for the third quarter of this year. "There still may not be much evidence of it, but it's the sense of the respondents that the ad rebound will occur by the third quarter."

Given the high hopes for ad spending, observed Garrett, it is not surprising the majority of respondents also expect the media M&A marketplace to pick up. "Expectations for increased deal making are especially high in heavily ad-dependent sectors like broadcast, consumer magazines, business-to-business publications and newspapers, where acquisitions should show strong returns on investment if ad expenditures indeed bounce back later this year."

Overall, 57% of respondents believe that M&A activity among traditional media companies will increase over the sluggish pace of 2001, while only 18% expect it to decrease further. Garrett cautioned that an increase this year will be relative to last year's depressed market and will not represent a return to the boom years of the late '90s. "Nonetheless, we may well see fairly brisk activity as buyers seek bargain merchandise in advance of the economic recovery and companies that grew too big during the boom years seek to unload under-performers or properties that don't fit with their strategy."

A major shift in this year's survey from prior years, Garrett noted, is the decrease in cash flow valuation standards that respondents consider reasonable for media companies. As expected in light of the recession, multiples of cash flow that respondents expect to pay or be paid are down across all media sectors.

The lower multiples, coming off years of historic highs, have made this an especially attractive time for prospective buyers to act on acquisition opportunities, said Garrett. "Among survey respondents, 70% would advise buyers to act now on transactions. But even more -- 77% --would urge sellers to wait if possible until the economy comes back. This dichotomy leads us to conclude that the nature of transactions this year will be large, strategic mergers; divestitures by past acquirors who are weeding their portfolios; and sales accelerated by financial or other ownership considerations."

Now in its eighth year, AdMedia Partners' survey of over 1,000 senior-level executives at leading media and financial organizations drew responses from companies operating in a wide range of media, many in more than one. Forty-five percent of respondents operate in newspapers; 44% in interactive media; 39% in business-to-business publications; 36% in exhibitions/trade shows; 30% in information publishing; 26% in consumer magazines; 19% in professional publications, 18% in books; and 17% in broadcast, including radio and television.