Media, Information Company Mergers Increase

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Merger and acquisition activity in the media and information industry in the first half of 2001 rose 17 percent from a year ago, according to a recent report by New York investment bank The Jordan Edmiston Group Inc. Buyers spent $12.7 billion to acquire 145 properties this year, up from 124 properties last year, the study found.


That is in stark contrast with the first quarter, which saw 98 transactions, down from 172 in the same quarter in 2000. The figures for the first half of 2000 do not include America Online's $106 billion acquisition of Time Warner, the investment bank noted.


"M&A activity in the media and information industry has rebounded in the second quarter of 2001, and we anticipate that this upward trend will continue into the second half of the year," said Wilma Jordan, CEO of The Jordan Edmiston Group.


The most active sector in the first half of the year, Jordan said, was the trade show and conference business, which saw twice as many mergers in the first half of this year as it had seen a year earlier. The number of M&A deals in the first half rose to 28, and the deals were worth a total of $530.7 million, according to the investment bank. A year ago there were 14 deals worth $73.1 million in the sector.


"Trade shows and conferences, like vertically focused information businesses, are strong franchises that usually come with predictable cash flows and healthy margins," the report said. "Those characteristics have made them attractive targets for acquisition-minded media companies looking to provide a full suite of integrated marketing opportunities to their core customers through vertical integration."


Not surprisingly, one of the worst-performing sectors of the media and information industry in the first half was the Internet sector. Deal volume among Internet media companies declined in the first half by 25 percent to 67 deals worth $5.5 billion, from 89 deals worth $16.9 billion a year ago.


"Internet media companies no longer have overvalued equity with which to buy assets or enter new markets, but they face a strong imperative to consolidate to survive in the marketplace," the report said.


The Jordan Edmiston Group report forecasts that the pace of consolidation in the business-to-business media and information industry in the second half of the year will quicken and return to previous levels.


Richard Mead, managing director at The Jordan Edmiston Group, said the forecast of increased activity assumes that a number of companies that previously announced large deals will complete corporate debt offerings to finance their acquisitions.


"M&A activity follows financing," Mead said. "So once the infusion of capital into these business-to-business diversified media companies is complete, the next logical move for them will be to look for strategic bolt-on acquisitions."


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