Changes in consumer behavior are fueling growth in digital media and e-commerce, creating opportunities for transactions. "This sector of the overall middle market for M&A continues to see constant and exciting innovation in products, content and programming," said Tanya Marvin-Horowitz, managing director, Allegiance Capital Corp., and chair of ACG New York's Third Annual Digital Media & Technology M&A Conference. "This translates into an exciting, but sometimes unpredictable, mergers and acquisitions environment."

Among the trends explored at the 2013 conference were the proliferation of mobile devices, including smartphones and tablets, and the unprecedented power of the individual consumer. Expect to see something of a land grab for startups that take advantage of these trends. Indeed, Internet pioneers, including eBay Inc. (Nasdaq: EBAY), Google Inc. (Nasdaq: GOOG) and Yahoo Inc. (Nasdaq: YHOO), are rapidly gobbling up young companies that leverage mobile devices. (For more, see "Yahoo Continues Startup Buying Spree" in Watercooler.)

"Everybody's trying to figure out how to use the four screens: computer, phone, tablet and laptop," said Melissa Stepanis, managing director, Silicon Valley Bank. The companies that create viable products and services combining all four devices have much to gain.

"House of Cards," the new political thriller series produced by Netflix Inc. (Nasdaq: NFLX), was mentioned frequently by panelists as an object lesson, exemplifying the new-found control consumers wield and renewing faith in a company some had begun to count out. Netflix bypassed traditional television and cable TV, offering the series, which stars Kevin Spacey and Robin Wright, only on its on-demand service. Another clever aspect of the "House of Cards" strategy: Netflix published all 13 episodes at once, encouraging binge viewing and recognizing that consumers want to access content when, where and how they choose.

Companies that leverage digital media through e-commerce will do especially well, said panelists. The trick will be to figure out a way to enable the user to make a note that he or she likes, say, the shirt Kevin Spacey is wearing in an episode of "House of Cards," without interrupting the user experience, and then serve up that information to the user in an appropriate context, such as the next time he or she does some online shopping, said Ron Shah, vice president of Stripes Group, a New York private equity firm.

One company already succeeding in exploiting digital media to enhance the shopping experience is GSI Commerce, which eBay bought for $2.4 billion back in 2011. EBay made the purchase to help grow the e-tailer's traditional customer base of small, mom-and-pop shops by adding huge online stores. GSI Commerce provides a set of services, including customer engagement, conversion, delivery and retention, for large online retailers, boasting such clients as Aeropostale (NYSE: AERO), Dollar General (NYSE: DG) and Guess (NYSE: GES).

"You have to go where the customers go," urged Reuben Hendell, the chief strategy officer of GSI Commerce, in the Fireside Chat that kicked off the event. "The consumer now is so much more sophisticated and has so many more expectations. We have to deliver against these expectations."

Throughout the discussion, several young companies were cited as examples of navigating the new world well, including:

* MyWebGrocer, which provides e-commerce tools for grocery stores and is backed by Stripes Group

* Outbrain Inc., a content-recommendation service used by publishers that has raised $64 million from venture capital firms, including Carmel Ventures, Index Ventures and Lightspeed Venture Partners, and has been making acquisitions of its own, including the recent purchase of Visual Revenue

* Pinterest, an online bulletin board that encourages members to share photos, which has raised $337 million in venture capital from backers, including Andreessen Horowitz, Bessemer Venture Partners and FirstMark Capital, with a recent valuation of $2.5 billion

* Riot Games, a game developer that does not charge customers to play but instead makes considerable revenue from selling in-game accessories and was bought by China's Tencent for $400 million in 2011

But don't count out traditional media companies, advised panelists. "They have things that are important to us," said Paul Cicanciolo, vice president at FirstMark Capital. "They have content."

The New York Times, for example, recently set up timeSpace, an incubator for New York digital media startups, pointed out Silicon Valley Bank's Stepanis.

And here's a lesson from the past: Back in the dot com boom of the '90s, brick-and-mortar businesses may have appeared like dinosaurs, but as Cianciolo pointed out, many adapted, survived and even thrived.

Proving the point, while Internet pioneer Inc. (Nasdaq: AMZN) has won first place in the National Retail Federation's list of the top 50 online retailers for the last six years, seven out of the current top 10 are originally offline companies: Wal-Mart Stores Inc. (NYSE: WMT), Best Buy Co. Inc. (NYSE: BBY), Kohl's Corp. (NYSE: KSS), J.C. Penney Inc. (NYSE: JCP), Target Corp. (NYSE: TGT), Macy's Inc. (NYSE: M) and Sears Holding Corp. (NASDAQ: SHLD).

Mergers & Acquisitions participated in ACG NY's annual conference, both in 2013 and in 2012, with editor-in-chief

Mary Kathleen Flynn conducting the Fireside Chats. Last year's was with John Zieser, chief development officer of Meredith Corp., which publishes women's lifestyle magazines, including Better Homes and Gardens. Meredith doubled its monthly unique visitors to 40 million from 20 million when it bought from the Reader's Digest Association for $175 million in March 2012. (For more, see "Modernizing Meredith" in the April 2012 issue of Mergers & Acquisitions.)

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