M&A Market Remains ‘Buoyant’
Managing Director Richard Mead at The Jordan, Edmiston Group Inc. (JEGI)—an M&A firm that serves the media and information industries—says his company has kept busy this year with an active market. He says he expects that trend to continue, and that JEGI’s pipeline remains as promising as ever. In this one-on-one interview with Publishing Executive, he discusses the importance of an accurate projection of growth for a potential acquisition and proper strategic positioning by a prospective seller.
What is your assessment of the current state of the M&A market for the publishing industry?
Richard Mead: The current M&A market is very buoyant, continuing a trend that began in 2004. [It's] being driven by several key factors including: major strategic companies with strong balance sheets pursuing growth through acquisitions; private equity firms with large investable cash positions; and available bank financing.
Allowing for the usual slow-down in the second half of the year (due to budgeting, vacation and holiday season), we believe that the second half will continue to see a good number of deal closings. During the first seven months of 2006, JEGI closed 20 transactions, and we expect to close an equivalent number by year-end. Our pipeline for 2007 is very encouraging, in regard to both quality and quantity of potential transactions.
When evaluating a potential acquisition, what are key components to consider?
Mead: An important focus for a buyer should be to confirm the historical financial performance of the business, as this will provide the platform for the future of the business. But the real key to valuation is the projected growth of the business and understanding where growth will come from, what it will cost to generate and whether management is capable of delivering it.
There are other “domestic” issues that are important as well, including the ability to create new revenue streams, especially non-advertising revenue. Overall, however, growth from the core business is the driving factor in encouraging a buyer to step up and pay for the business.
What advice would you give a publisher looking to position his property to sell?
Mead: Having the No. 1 titles in fast-growing, complex, industry sectors will always help to attract buyers. Having titles that have shown consistent year-over-year revenue growth at rates in excess of publishing industry averages will be impressive to buyers. Having a compelling Internet strategy that is revenue-enhancing will be essential. And, having titles that fit hand in glove with a buyer’s existing portfolio will convince buyers of the strategic sense of the deal.
But before publishers take the step toward offering their property for sale, there is a lot of thinking to be done to ensure that the business is in the best possible shape. Time spent in advance of sale usually equates to greater returns at the closing.