Media Mayhem

Mid-market business-to-business publications are seeing a wave of M&A activity, with the digitally adept gaining momentum, against a backdrop of a struggling print market.

Going back to 2007, a number of deals have reflected this trend. To wit, BNP Media acquired certain online, print and trade show assets from Ascend Media; Questex Media Group subsumed online B2B FierceMarkets; and, on a larger scale, Incisive Media bought American Lawyer Media — a deal that should see ALM capitalize on Incisive's Web proficiency.

"The B2B e-media market is poised to grow 20% over the next four years, and the larger B2Bs are only now trying to ramp up digital revenues," says one executive who recently saw his own online publication sold to a larger player in the space.

Several factors are driving the larger players deeper into the industry, according to Neal Vitale, CEO of 1105 Media. Postage costs, for one, have continued to climb, and paper has grown more expensive as well. Throw in the fact that corporations are acquiescing to the idea of advertising online, and it creates a collusion of events that are squeezing print B2Bs.

Vitale, himself, made several acquisitions in 2007, taking control of event assets and online/print hybrid publications. He cites that lack of printing costs helps make online businesses more attractive — even if they are spending money to send out e-newsletters or daily updates. Among 1105 Media's acquisitions were Fawcette Technical Publications and Federal Employees News Digest.

1105 Media's strategy reflects a best practices approach for reaching both advertisers and readers, according to Richard Mead of intermediary The Jordan, Edmiston Group Inc. Mead calls it a multiplatform approach of supporting online publications with events and webinars. He also notes that magazines and print are rapidly being phased online, and in some cases, simply phased out.

"What's going to win the day is going to be who's better organized online," he says. "A site that can provide indices directing readers to other topics, keeping them at the Web site, engaged with advertisers for the longest time possible, will most likely succeed," he adds.

The consolidation, Mead says, will see the smaller players snapped up by mid-level buyers, who are then gobbled up by the industry sharks — conglomerates looking to expand existing platforms.

The priority to increase digital distribution is reflected in a recent survey from AdMedia Partners, which indicated larger companies were willing to pay a significantly higher Ebitda multiple on Internet-based B2B publications than similarly themed print or event planning companies. According to the poll, multiples for online media B2Bs ranged from 12x to 15x, with events and trade show media, garnering just seven to eight times from buyers.

Valuations also depend on the businesses B2Bs serve. Just as the fate of manufacturing companies can diverge sharply depending on their end markets, business publications share the same kind of disparate fortunes.

Michael Parker, a managing director with AdMedia, notes that journals covering technology, finance and construction will likely be some of the more attractive fields for buyers this year.

Meanwhile, the pressure is on companies in the space to squeeze synergies wherever they can. That often means capitalizing on popular titles to expand the platform to new venues, such as trade shows or webinars.

Vitale points out that events serve not as stand-alone revenue generators but rather as a complimentary service, providing a physical presence onto which publishers can link related products and build out the brand. Most importantly, advertisers like events too, and this should keep dealmakers active.

1105 Media, for example, acquired a number of events from National Trade Productions for its Government Information Group.

Vitale is not alone, multiple dealmakers say. Reed-Elsevier, Nielsen, Haymarket, Summit Media and Questex are all possible candidates to make acquisitions in the space. That's not to say, though, that everyone will be active.

The AdMedia survey did not offer a completely rosy outlook. For the first time since 2001, more than 50% of the respondents cautioned that buyers should wait on M&A, and 35% of respondents predicted valuations would begin to decline beginning in 2009. Moreover, the credit crunch has taken its toll, as 81% felt commercial banks' criteria would tighten this year and 68% of financial buyers said they felt prospects for M&A were down — compared with just 5% a year earlier.

However, if things get bad enough, the possibility exists that distressed opportunities could arise. Few people in the industry missed the fact that Ziff Davis Media went bankrupt in March, a revelation that likely had a number of parties perusing its assets.

And others are inclined to stay active no matter what the conditions look like. "I don't know why anybody would say [online valuations will plateau]," Vitale says, referring to the AdMedia survey. "We're always looking to expand."