In 2008 the deal value of consumer magazine acquisitions in 2008 fell to $173 million across 24 transactions, plummeting from the 30 deals worth $5.1 billion in 2007, says M&A advisory firm Whitestone Communications. "The consumer magazine deal market was reduced to tatters," says Ed Fitzelle, managing director, Whitestone, in a statement. He attributes the radical decline to the usual suspects—ad dollar migration to the Internet and the economic downturn. By the time we hit the fourth quarter of 2008, the deal pace had slowed to four transactions worth $34 million, less than half the volume and value of Q3 2008. Among the major deals last year, Whitestone cites Bonnier Corp.'s purchase of Working Mother Media for an estimated $20 million to $30 million, and Consumer Union's acquisition of Gawker Media's Consumerist blog.
As several analysts have noted in recent months on the b2b side, most of the acquisitions have been strategic and involved little outside funding, as cash-rich companies looked to improve market share during tough economic times. In the b2b space, remarkably, the number of deals in Q4 kept pace with Q3.
The specialized business media sector (financial, real estate, business and legal markets) actually fared well last year, since their must-have information services and databases remain necessary to their respective channels despite a downturn. Led by a $4.1 billion purchase of ChoicePoint by Reed Elsevier, the specialized business information sector saw 140 deals in 2008 worth $10.9 billion, up from 122 deals valued at $4.1 billion in 2007. Unlike other segments, the specialized content and database area maintained its deal value in 2008.
While signs of decline were clear even in the Internet content sector in 2008, M&A activity remained strong through much of the year. There were 102 content-related Internet deals in 2008 worth $4.7 million, compared to 90 deals in 2007 worth $6 billion. The raw numbers for 2008 work against challenging comparatives, since 2007 saw Google purchasing DoubleClick. The pace of acquisition slowed while values accelerated a bit in Q4: 29 deals for $1.1 billion against 38 deals at $473 million in Q3. CBS' acquisition of CNET, AOL's purchase of the social network Bebo and Waterfront Media's merger with Revolution Health Network led the year's deals. In the digital arena, many publishers have been looking to accumulate market share and valuable technology as start-ups feel the pinch of limited funding. Nevertheless, publishers may be running out of likely targets after a two-year buying spree.
Whitestone says that across all segments of media, deal volume was up and value was down. Acquisition targets were not able to deliver the kind of performance that merited high prices and the buyers were unable to get bank funding, a combination that keeps prices low.
In a market with little visibility, Whitestone say Q1 2009 will be key to sensing some direction in the media M&A market.
