Since I last wrote, economic uncertainty, driven by the mortgage
meltdown and upheaval of the credit markets, has been a central
topic of discussion. Still, M&A for the media and information
industries continued to flourish during the first quarter,
as the number and overall value of deals completed were on
par with 2006 and 2007 levels, and well ahead of 2005.
I’m pleased to say that JEGI has continued to thrive
as well, having closed eight M&A transactions through
March. Most recently, we sold Intercept Interactive’s
Undertone Networks, a premium online advertising network,
to JMI Equity, further strengthening JEGI’s position
as the leading investment bank for Interactive M&A. Other
JEGI transactions this past quarter included the sale of Becker
Group to Viad; Money-Media to Pearson; FierceMarkets to Questex
Media (Audax Group); ThinkService to CMP (United Business
Media); Medical Knowledge Group to CIVC Partners; Hallmark
Data Systems to EBSCO Industries; and Gartner’s Vision
Events to CMP.
While the debt markets have become more restrictive overall,
the federal government has taken important steps to increase
liquidity in the market, stimulate economic growth, and reduce
the cost of capital. In February, the government announced
a $168 billion Federal tax rebate package, and in mid-March,
just days after a rare Sunday decision to cut the discount
rate, Federal Reserve Board chairman Ben Bernanke and his
colleagues cut the more important federal funds rate target
by three quarters of a percentage point, to 2.25%. This marked
the second such move in just under two months, and the steep
cut was the sixth consecutive rate reduction, leaving the
benchmark overnight lending rate at its lowest level since
late 2004.
In spite of the Fed’s efforts, conventional wisdom
in many quarters these days is that we’re facing a major
slowdown in M&A activity across the board in the months
ahead. Yes, it’s true that the aggressive debt market
that fueled the heady deal pace in 2006 and most of 2007 has
cooled considerably. Credit has tightened, and banks are becoming
cautious about lending for anything other than blue-chip deals.
Still, when it comes to mid-market media and information transactions,
there are interesting forces at play that we think will help
maintain a steady level of high quality deal flow through
the summer and into the fall.
For one thing, media and information businesses are going
through an extraordinary period of change – in our Client
Briefing, Vik Raina of Boston Ventures describes it as a “once
in a lifetime transformation, which will enable a tremendous
amount of wealth to be created”. Strong strategic companies
see this period of economic uncertainty as an opportunity
to gain market share and invest in high growth media sectors.
Private equity firms will be seeking transformational businesses
whose growth trajectories will help justify ROI models that
are under-leveraged in comparison to traditional PE financing
models. Several of our private equity friends have
told us they are prepared to “over-equitize” now
to put their funds in play, with an eye towards a recap down
the road that will adjust the debt to equity blend more to
their liking. Some of our entrepreneurial friends
have a different reason for bringing their high growth businesses
to market. In anticipation of a possible Democratic victory
in the presidential sweepstakes, these sellers want to cash
out now, before the change in capital gains tax rates that
would likely occur in 2009.
Meanwhile, on the JEGI front, we’re delighted that
Thomas P. Creaser has joined the firm as Executive Vice President,
Professional Services Group. In this role, Tom is responsible
for overseeing the internal operations of JEGI’s project
management and its professional support staff of Vice Presidents,
Senior Associates, Associates and Analysts. Tom was most recently
Director of Operations & Business Planning at The Walt
Disney Company.
On March 13, JEGI held its annual dinner for American Business
Media’s Board of Directors at the 21 Club in NYC. The
CEO’s in attendance were upbeat overall, especially
on the growth prospects of their digital media and mobile
offerings. Similar sentiments about growth were expressed
by Tim Weller, Group Chief Executive, Incisive Media and Peter
Horan, CEO, IAC Media and Advertising in this edition of the
Client Briefing. Interestingly, the chief concern for both
executives is finding – and keeping – talented
people. As Mr. Horan put it, “There are thousands of
good people, but only a few great people. My success is proportional
to my market share of world class talent.”
In early February, JEGI and Booz Allen Hamilton teamed together
to host more than 30 CEOs at the first of three annual Emerging
Company Dinners at the 21 Club in NYC. We are grateful to
Tad Smith, CEO, US, Reed Business Information, for leading
a very innovative and lively discussion on growth through
innovation.
We are also pleased to announce the release of the fifth
annual CEIR Index Report, a leading source of exhibition industry
performance data. JEGI is Title Sponsor of the Report, which
revealed that the exhibition industry grew 3.2% in 2007 over
2006 levels, marking the fifth consecutive year of growth.
We will be sponsoring, attending and speaking at a number
of industry events in the coming months, including SISO CEO
Summit, Paid Content EconSM, ABM Spring, SIIA NetGain, and
SIPA Annual Conference, so be sure to look for us. In the
meantime, please enjoy this edition of the JEGI Client Briefing,
and feel free to contact our Managing Directors or me with
any questions regarding the marketplace and/or our services.
Best Regards,
Wilma H. Jordan
Chief Executive Officer
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