Largest M&A Transactions of the Year Still to Come
Reed Phillips III, managing partner of the 10-year-old media investment firm DeSilva & Phillips, says that after a strong first half of 2006, he expects a flood of activity in mergers and acquisitions over the final months of the year.
PE: What does the current M&A market look like for the magazine industry? Is it a good time to sell or a better time to be looking for potential acquisitions?
Reed Phillips III: It continues to be a good time to sell. The market in 2005 was very strong, and it continues to be strong in 2006. In 2005, a lot of the properties that went to market were top-shelf media properties that sold for high valuations. That encouraged a lot of owners of second- and third-tier properties to put their properties on the market, expecting high valuations. While the valuations for those properties have been good, in some cases these owners aren’t seeing the kinds of valuations they had hoped for. There are a lot of transactions on the market right now. And we are expecting a lot more in the second half—even more than we have seen in the first half. There are also a lot of discussions about some fairly significant transactions and, based on the pipeline we are currently seeing, we think that the largest transactions of the year are going to occur in the second half.
PE: What other trends are you seeing in the market?
Phillips: The market continues to be strong. One twist that we are seeing is that the strongest buyers continue to be private equity firms. [Strategic acquisition firms] seem to be more focused on buying properties other than magazines: trade shows, online businesses, etc. They are looking to deepen and diversify their media holdings, rather than expand into new markets. They want to make sure they are media neutral in the markets they are currently in, so they are not just delivering magazines, but also online newsletters, database information, custom publications, etc. The focus [strategic acquisition firms] have right now seems to be, “How can we deliver more to our current customer base?” They are less focused on expanding into new markets. But private equity definitely is picking up the slack there; they are keenly interested in magazine properties, and that interest continues to be strong.