Notes from Journée Magazine 2008: "Editors are the original Google"
Delivering his keynote address at Journée Magazine 2008 yesterday, Mark Edmiston of New York-based AdMedia Partners argued that magazines are better placed than other media to survive the challenges posed by the Internet . "I think magazines will play an enormous influence in the evolving media world," The one-day conference was hosted by Magazines du Québec.

Conventional wisdom has it that young people don't read, want their information immediately and see magazines as old-fashioned, Edmiston said. But "200 years of history doesn't fade away just like that." Fifty years from now, people will still read magazines and the basic model will not be that different from what it is today.

Magazines have an attractive price-value relationship and contain lots of information in a user-friendly package. However, their advantage lies in their ability to gather, organize and distribute data. "Magazine editors are the original Google search engine," Edmiston said. "Consumers need an editor, a filter from the stuff thrown at them from the Web, and who better than editors?"

The Web gives magazines their best opportunity to strut their stuff. Brands have always been important, Edmiston said, but they're vital online. On an "unregulated and irresponsible" Web, magazine brands can ensure information is reliable. "Do you want RSS feeds of news from any source or do you want Time or Newsweek to tell you what's important?"

Traditional mediums will have to define new roles online, Edmiston said. Regularly scheduled TV, for example, is disappearing. As a result more TV will be broadcast on demand over the Internet. Newspapers will likely become more targeted, while radio will become even more fragmented, sinceit can be delivered around the world on the Internet.

As for magazines, Edmiston warned that the worst aphorism to follow in a time of change is "if it ain't broke don't fix it." The old magazine model, where information is delivered weekly, monthly or quarterly, is going. It will be replaced by a "platform agnostic" content model that is driven by consumer needs-readers will be able to access info when and where needed.

Although the Web will be a major medium that could take as much as 50% of media advertising dollars in time, Edmiston belives "the Web and traditional media are complimentary, not mutually exclusive."

Asked if he'd still get into the magazine industry if he was 20, Edmiston replied: "I'm excited about the prospects. The industry has been slow to move but will be a major player on the Web."
-Mark M. Edmiston, Managing Director

On one hand, 68% of US online marketers polled by iMedia Connection said established media will lose dollars to user-generated content.

On the other hand, essentially the same percentage of respondents to an AdMedia Partners survey of US senior media executives said the growth potential of social networks was overhyped. Those same executives were almost evenly split as to whether the perceived growth potential of user-generated content was overhyped or accurate.

[Seth] Alpert argues that blogs, in particular blog networks, may have trouble generating reader loyalty, a factor that may give pause to advertisers. [...]

"It doesn’t truly own the audience," Alpert says. "There's not a lot of proof that you could generate substantial advertising revenue through a blog network. Most of those companies are fairly small." [...]

"Prominent examples of these recent [blog] deals are clearly the exceptions," says AdMedia’s Alpert. "The overall business is not mature enough. It needs to get to a level of legitimacy measured by audience size or revenue and profit, preferably both, in order for a lot more M&A to take place."
-Seth R. Alpert, Managing Director

Mark Edmiston, managing director of the media merger advisory firm AdMedia Partners Inc., said M&A activity slowed down primarily as a result of the ongoing credit crunch.

"Essentially what has happened is that the credit crisis has caused lenders to reduce the amount of leverage they are willing to put into a transaction," Edmiston said. "A year ago or 18 months ago, you were looking at [leverage that was] 6x, 7x, 8x or sometimes 9x cash flow. Now you are looking at 3.5x or 4x cash flow."

Those tightened financing requirements have caused many private equity buyers to rein in their spending. "The most active players in the past year or so have been private equity guys; and in the first quarter of this year, not only did they disappear but in fact you saw some of the bigger deals unraveling. Deals that have already been announced are not going to conclusion." [...]

"The strategic buyers in many cases were almost driven out of the market last year because there was so much private equity money floating around," Edmiston said. "And now you're seeing strategic buyers coming back into the market." [...]

Looking ahead, Edmiston said M&A activity in the media and new media industries is likely to pick up in 2008, though he believes it will at first remain centered around strategic buyers.

"Probably for the first half of the year, you are going to see the transactions that do close are going to be more likely to have either only or principally a strategic element to it," he said.

And those strategic buyers that do buy during this downturn, he noted, may find themselves taking home a bargain.

"Even though it's a little hard to value these businesses, they're not worthless ... and so at a price, it's a good deal," Edmiston said. When prices get low enough, he added, more buyers will emerge.

"People say that fear and greed are the two emotions that motivate this market," Edmiston said, "and when the fear goes away, the greed comes back and people say, 'Oh, what a deal.'"
-Mark M. Edmiston, Managing Director

"The mergers and acquisitions market for these interactive ad shops is still strong," says Seth Alpert, managing director of AdMedia Partners, a mergers and acquisitions advisory firm which worked on the i33 deal. "In the long term it gets harder to remain independent."
-Seth R. Alpert, Managing Director

McGovern speaks at "Breakfast with a Leader" sponsored by AdMedia Partners, a merger and acquisition advisor, and the Magazine Publishers of America (MPA)
Pat McGovern, founder and CEO of International Data Group (IDG), forecasts strong growth in China for B2C and B2B media

AdMedia Partners, a leading merger and acquisition advisor, and the Magazine Publishers of America (MPA) sponsored this morning's "Breakfast with a Leader" featuring Pat McGovern, the founder and CEO of International Data Group (IDG). In his address, McGovern reprised the history of international publishing ventures in mainland China and outlined the very attractive prospects for continuing development of B2C and B2B media in that country...

How do you plan to survive the looming recession?

"Fortunately, consolidation in the marketing communications and media businesses continues to generate activity. The growing number of interactive agencies and media Web sites provides an expanding group of potential sellers, while strategic and financial buyers – both domestic and offshore – continue to see solid investment opportunities. So far, so good."
-Abbott C. Jones, Managing Director

"As print continues to struggle in so many industries, all b-to-b companies are still trying to answer the digital question: How do we make money?" said Mike Parker, a managing director at media investment bank AdMedia Partners. "As volume increases in the digital space, [ad] dollars need to catch up to print levels."

Parker said UBM's restructuring of CMP should, at least on paper, improve customer relations by "splitting [the company] into vertical silos, as opposed to a horizontal sell."
-Michael E. Parker, Managing Director

AdMedia Partners worked as financial advisors to Russell Kern on the deal. Ad­Media managing director Abbott Jones said that there is an “intense interest" in acquiring DM firms because they "repre­sent accountability" and can show ROI.

"Russell has been approached by a variety of firms over the years, but Om­nicom really seemed to offer a benefit to the company," Jones said."
-Abbott C. Jones, Managing Director

"It's a clear indication that the landscape is changing for the larger business-to-business publishers as print publications continue to struggle on the ad sales side," said Michael Parker, a managing director of the merger and acquisition advisory firm AdMedia Partners. [...]

"I think [Reed Elsevier will] come out as a group first, and then depending upon market reaction, they may have to bundle some of the publications," Mr. Parker said.
-Michael E. Parker, Managing Director

The Brown [Publishing Co.] acquisitions underscore the resilience of this sector of the marketplace, said Mark M. Edmiston, managing director of media investment bank AdMedia Partners. "There's a lot of opportunity in the local markets," he said. "If you're a Staples in Lancaster, Pa., you still need a place to advertise paper shredders, even if the national [advertising budget] is cut back."
-Mark M. Edmiston, Managing Director

Years ago, Roy Bostock played on Duke University's football team. Now the new chairman of Yahoo Inc. is facing a blitz from Microsoft Corp., and some blocking and tackling skills could come in handy. […]

"Roy knows how to calculate shareholder value by melding and merging companies," says Abe Jones, a managing director at New York's AdMedia Partners, a boutique investment bank specializing in marketing transactions.
-Abbott C. Jones, Managing Director

"Too many boutique life science PR firms avoid recommending videos to clients because it means the firm will lose out on revenue it could capture if the work stayed in house," said Philip Palazzo, Jr., Managing Director, AdMedia Partners, Inc., a New York-based investment bank and financial advisory firm serving owners of privately held companies in health care marketing services, media and publishing, and related interactive businesses. "The service offering of the combined entity will be compelling for both clients and prospects."
-Philip A. Palazzo, Jr., Managing Director

AdMedia Partners To Sponsor Second Annual AlwaysOn OnMedia Conference in New York City
January 28-30, 2008

AlwaysOn OnMedia - a two-and-a-half day executive event featuring technology CEO's from Silicon Valley leading presentations and high-level debates with the global advertising and media establishment, about disrupting user behavior and creating new opportunities in the marketing, branding, advertising,and public relations industries...

Recession or not, holding companies, agencies and private equity firms are expecting another busy year of deal-making, as they scramble to bolster their new media capabilities and digital shops try to capitalize on relatively high valuation rates, according to a new survey from AdMedia Partners. [...]

"If you've got to have it, you've got to have it. It doesn't matter if times are tough," said Seth Alpert, a partner and managing director at AdMedia. "You don't want to make it tougher by not being able to fulfill all the needs of your clients."
-Seth R. Alpert, Managing Director

"Despite concerns of a recession or economic slowdown in the U.S., respondents were surprisingly optimistic about the environment for M&A deals and M&A valuations in 2008," said Abe Jones, managing partner at AdMedia Partners.
-Abbott C. Jones, Managing Director

M&A Advisor AdMedia Partners Sponsors Breakfast with New Chairman of Magazine Publishers of America (MPA), John Griffin
Executive VP of National Geographic Society and its Magazine Group's President outlines his thoughts on the industry and what magazines need to do to prosper.

AdMedia Partners, a leading M&A advisor, sponsored "Breakfast with a Leader" yesterday featuring John Q. Griffin, the new Chairman of the Magazine Publishers of America (MPA). Griffin, who steps up to Chairman of the MPA, while remaining the President of the Magazine Group, National Geographic Society, outlined his thoughts on the industry and what he believes magazines need to do to continue to prosper in this world of challenges and changes...

It's a disorienting time in the media business. Consumers can read newspapers on their mobile phones, watch TV shows on their iPods, and befriend advertisers in cyberspace. [...]

The outlook would be even gloomier without the prospects of the Olympics and the presidential election, two traditionally rich sources of ads. The election alone represents a potential $2.5 billion windfall for television and radio stations, says Mark Edmiston, managing director of AdMedia Partners.
-Mark M. Edmiston, Managing Director

"U.S. News has made the decision to basically pin its business model on [high school] rankings," said Mark M. Edmiston, a managing director of AdMedia Partners, an investment banking company. "They've basically given up the battle of competing with Time and Newsweek directly and carved out this niche of being the ranker."
-Mark M. Edmiston, Managing Director

Even proponents of the M&A approach admit it is fraught with challenges. "Making acquisitions successful is a lot of work," said Seth Alpert, managing director at AdMedia Partners, which advised iCrossing during its acquisition of Proxicom. "We all remember what happened seven years ago. This pair of companies is trying to be smart about the deals. But that's not to deny there are challenges."
-Seth R. Alpert, Managing Director

"Banks and financial institutions are tightening lending rates, which means the private equity companies will slow down their investment activities to a more measured pace and look for better values," said Parker, who was most recently senior VP at Nielsen Businessparker Media's Marketing/ Media Group. That opens a window for strategic players [...]
-Michael E. Parker, Managing Director

How Publishing Companies Position Themselves for Growth: Best Bets for the 21st Century
In a world of increasing media options, industry leaders must rethink their efforts to attract readers and advertisers, and expand the footprint of their brands. A panel of high-level executives discusses the topic at the Magazine Publishers of America's 2007 AMC conference.
-Mark Edmiston of AdMedia moderates.

"That sounds like a lot of money," said Seth Alpert, managing director at AdMedia Partners, an investment bank specializing in marketing transactions. [...]

[Alpert] added, however, that Dotspotter's tepid numbers could have actually attracted CBS to the site.

"Deals like this do often occur because the acquiring company has immediate plans to create value that the company being acquired couldn't create on its own," he said. "You're going to pay a lot more for a site that's already realized its potential."
-Seth R. Alpert, Managing Director

[Ted Pincus'] analysis is echoed by Phil Palazzo, MD at AdMedia Partners, the media and marketing-focused M&A advisory firm.

"In our sector, because the deals are smaller... the transactions are not as highly leveraged," he explains. "So getting financing for a $20 million or $40 million transaction in marketing services is a lot easier than financing Chrysler."
-Philip A. Palazzo, Jr., Managing Director

Mark Edmiston, a managing director at media investment bank AdMedia Partners, who had shopped Business 2.0 on behalf of Time Inc., said Fortune may pick up around 25% of the ad dollars previously devoted to Business 2.0.

"It had turned into a tiny magazine, and tiny is not Time Inc.'s forte," Edmiston said. "But that doesn't mean that new economy business titles can't survive."

He added that advertisers are not necessarily going to ramp up spending on other business titles as a result of Business 2.0's shuttering. "They're not going to increase their budgets [with specific titles] just because Business 2.0 has gone away," he said.
-Mark M. Edmiston, Managing Director

[...] Mark Edmiston, a managing director at media investment bank AdMedia Partners, amplified comments from others that before embarking on a new print product, publishers have to make sure there will be a receptive audience. "Leveraging existing assets is one thing," he said. "More important is identifying a market first and then seeing how you best service it through whatever media," he said.
-Mark M. Edmiston, Managing Director

Mark Edmiston, managing director at AdMedia Partners, a financial advisory firm, says he once tried to buy the company in the early 1980s for the Washington Post Co., but at the time, he didn't think the Zagat concept would ever work beyond a couple of cities. He says the Zagats have more than delivered on the execution of their plans for expansion.
-Mark M. Edmiston, Managing Director

"People are looking for pools of talent," said Greg Smith, a managing director at New York merger and acquisition firm AdMedia Partners. Smith, who estimated that the volume of digital deals this year is two to three times what it has been in years past, cited Google's $3 billion purchase of DoubleClick in particular as an accelerant. "It really sent shock waves through the industry," Smith said. "It just really got people's attention focused."
-Gregory C. Smith, Managing Director

"[The market for interactive companies is] extremely competitive because most of the good companies are being pursued by multiple companies," says Seth R. Alpert, managing director of AdMedia Partners, a New York boutique investment bank specializing in advertising and marketing transactions.
-Seth R. Alpert, Managing Director

The Backpacker sale suggested as much, said Polly perkins Johnson, business-development director at AdMedia Partners. "Rodale is at a tipping point, where Hearst was maybe eight years ago, and that is recognizing that they could no longer sustain within their infrastructure and overhead the smaller properties," she said. "Therefore it sold Backpacker, yes to get cash but No. 2 to allow a smaller property to blossom on a smaller platform because the overhead of companies as they grow begins to crush these smaller properties."
-Polly Perkins Johnson, VP Business Development

"This is an Internet-TV play," said Mark Edmiston, a managing director at media investment bank AdMedia Partners, referring to the deal. "Of course, Dow Jones produces a newspaper, but Murdoch is going to work the electronic side. He wants [the Journal] distributed on new platforms, which is something the current Journal hasn't been very successful at," he added.

Edmiston said he doesn't expect any advertising fallout from the deal. "News Corp. is not going to scare away any advertisers," he said. "The Journal is still a great brand and is known for excellent business coverage."
-Mark M. Edmiston, Managing Director

"Fox Business doesn't make your heart beat faster, but a brand with the Journal's content and Dow Jones' resources would be a formidable competitor for business news," said Mark Edmiston, a managing director at media investment bank AdMedia Partners. He added that a News Corp. takeover of Dow Jones would give business advertisers access to a "powerful combination of TV, online and print delivering a comprehensive package of news."
-Mark M. Edmiston, Managing Director

"The site is doing particularly well," says Mark Edmiston, a managing director at investment banking firm AdMedia Partners. "In another year [New York] may be able to make a case that the magazine is the core of a multiplatform business."
-Mark M. Edmiston, Managing Director

Phil Palazzo, an MD at AdMedia Partners who advised [Chandler Chicco Agency] on the deal, said that the PR industry's high growth rate is fuelling interest in it from acquirers outside of the traditional holding companies.

"[In] marketing in general, there's been an awful lot of interest from strategic and financial buyers," he said. "And that's certainly been the case with PR."

Palazzo pointed out that in both the [Financial Dynamics] transaction and in CCA's, the buyer was able to create a PR platform that they felt rounded out and complemented their other service offerings.

"[Inventiv] is a company that focuses only on top pharma and biotech clients, so they really understand what they do," he said. "The service offering, potentially, to clients is going to be much stronger as a result."
-Philip A. Palazzo, Jr., Managing Director

''The parties are the business,'' said Mark A. Edmiston, managing director of AdMedia Partners, who did some work for Mr. [Jason] Binn several years ago. ''Watching him work a room is like watching Derek Jeter play baseball.''
-Mark M. Edmiston, Managing Director

Charles Wrubel, managing partner of New York-based consulting and [financial advisory] group AdMedia Partners, said that a bid higher than Murdoch's is unlikely.

"Bidding up for Dow Jones has the potential of overvaluing the company to the point where it might not be worth it in the long run," Wrubel said. "Murdoch appears to have more of a stomach to handle a bidding war."

A higher bid than Murdoch's is unlikely, said Charles Wrubel, managing partner of AdMedia Partners, New York-based consulting and [financial advisory] group.

"Bidding up for Dow Jones has the potential of overvaluing the company to the point where it might not be worth it in the long run," Wrubel said. "Murdoch appears to have more of a stomach to handle a bidding war."

Price Rationale: Standard ad agencies have been selling for an average multiple of five times earnings, says AdMedia Partners, a New York City [financial advisory firm]. The asking price here is just shy of five times 2006 earnings. (The [Illinois ad] agency handles digital work but not enough to fetch a premium price.)

Pros: AdMedia says that for an agency of this size to be healthy, its revenue per employee should fall between $150,000 and $200,000. With nearly $200,000 in revenue per employee, this agency is right on target. Plus, several clients are growing fast, which could translate into higher billings down the road.

As the Prospect of Microsoft selling off Avenue A|Razorfish looks less likely, industry watchers are speculating over which assets the software giant might add to bolster its new creative and media agency business. [...]

Still, Microsoft can't simply order from an agency menu, according to Seth Alpert, managing director at AdMedia Partners, [a financial advisory firm] specializing in marketing transactions. "AKQA is definitely not for sale at the moment."

"The agency business wasn't what drove the deal, but I think they are going to hang onto Avenue A and even grow that side of the business," said Alpert. [...] If and when Microsoft does go after additional agencies, aQuantive will be in the driver's seat, Alpert added.
-Seth R. Alpert, Managing Director

There's one local capability that could serve Chicago well in the fast-changing communications business: marketing services, research and data collection. "There are a lot of successful marketing services companies out there. There are a lot of quality direct marketing companies, and at a time when it's all about accountability, you'll be seeing more and more [acquisition] transactions," said Abe Jones, managing director, AdMedia Partners, New York.
-Abbott C. Jones, Managing Director

Synergies aside, is Rupert Murdoch's $5 billion bid for Dow Jones & Company really about the media mogul's desire to acquire the patina of respectability that has eluded him as he built his News Corporation empire? [...] The New York Times' David Carr argues that the price that Mr. Murdoch is offering - $60 a share - is a multiple of ego, not earnings. [...] "When I used to work with Katharine Graham, she used to say his name and then almost spit on the ground," Mark M. Edmiston, managing director of AdMedia Partners, an investment bank, told Mr. Carr. "But capitalism is built on the highest and best use of capital and he understands that. Money has no conscience."
-Mark M. Edmiston, Managing Director

As Internet media companies bulk up, more acquisitions are likely, both on a small scale like ScreenTonic and a larger one like DoubleClick, predicted Seth Alpert, managing director of AdMedia Partners, a New York investment advisory firm. "Scale really does matter," he said. "What comes with scale is knowledge and that knowledge is a significant advantage in the marketplace."
-Seth R. Alpert, Managing Director

Primedia put the [Enthusiast Media group] up for sale in February. With $524.8 million in 2006 revenue, the group may fetch as much as $1 billion, according to Mark Edmiston, managing director at investment bank AdMedia Partners Inc. in New York.
-Mark M. Edmiston, Managing Director

"Buyers are liquid, and both the strategic players and private equity companies have a lot of capital."
-Gregory C. Smith, Managing Director

Meredith has "identified holes in its portfolio" and gone after companies that could fill the gap, said Mark Edmiston, managing director at AdMedia Partners in New York. AdMedia brokered several of Meredith's recent acquisitions.

"The world Meredith grew up in has changed and they recognized they needed to be proactive by adding different kinds of resources," Edmiston said. "John Zieser knows exactly what he wants and the price he's going to pay."
-Mark M. Edmiston, Managing Director

The ad business is back to its consolidating ways. This time it is the burgeoning young Internet-ad shops that are up for grabs. In just the past two months, two high-profile digital-ad firms -- Digitas and AKQA -- have been acquired. The mergers-and-acquisitions boom in digital marketing is likely to continue in 2007, according to a new survey by AdMedia Partners, a New York boutique investment bank specializing in advertising and marketing transactions. This year's M&A activity is likely to focus on sectors such as search marketing, mobile marketing and buzz marketing, according to the Web-based survey of 3,200 ad and marketing executives and private-equity investors.
-Seth R. Alpert, Managing Director
-Abbott C. Jones, Managing Director

Mark Edmiston, a Managing Director of AdMedia Partners, said, "As may be the case in many industries, respondents to our industry survey believe that in the year ahead financial buyers will continue to dominate the media M&A market. Respondents certainly think strategic buyers will also be active - just over half predict deals driven by strategic buyers will increase over 2006 and only a sliver anticipate a decrease - but private equity firms are expected to remain the strongest force."
-Mark M. Edmiston, Managing Director

As the online ad market booms, private equity firms flush with investment capital are looking at an array of Web players with an eye toward combining them into large-scale digital marketing firms. . . . "There's a lot of money around," added Seth Alpert, managing director at AdMedia Partners, a New York M&A bank specializing in the marketing industry. "There's a perceived opportunity to create a different sort of marketing services company."
-Seth R. Alpert, Managing Director

Media companies are starting to show strong interest in adding interactive firms to their portfolios, said Seth R. Alpert, managing director of AdMedia Partners, a New York investment bank that facilitates deals between advertising and marketing companies. AdMedia represented New Media Strategies in its recent acquisition. "Serving advertisers is now seen as being more broad than putting ink on paper or building Web sites," Alpert said.
-Seth R. Alpert, Managing Director

"The business model for magazines for many years was to give away subscriptions and get the advertisers to pay," said Mark [Edmiston], managing director, AdMedia Partners. "There's been a fundamental change. It's not just the Net. Twenty years ago, cars, liquor and tobacco were [about] 65 percent of advertising. Liquor's gone away, tobacco's gone away and cars have become a lot more targeted. So what Ann [Moore] is trying to do, and I think correctly, is permanently reposition to fit the new model."
-Mark M. Edmiston, Managing Director

"As far as strategy is concerned, there is very little wiggle room," agreed Mark Edmiston, managing director of investment bank AdMedia Partners in New York. "Ad revenue will continue to decline since the consolidation of retail and the migration of classified to the Web are structural changes in the newspaper environment. This makes increasing ad revenue problematic so they will have to turn to increasing circulation revenue or cutting costs."
-Mark M. Edmiston, Managing Director

All that, of course, after a blowout 2006.

AdMedia managing director Mark Edmiston, who handles the media bank's magazine assignments, pins the projected boost in buying activity on a steady economy and relatively favorable borrowing conditions.

As for sellers, the anticipated increase is an appreciation by those contemplating exit strategies that our goldilocks environment can't last forever. "A seller who waits," Edmiston explains, "risks something really bad happening."
-Mark M. Edmiston, Managing Director

The b-to-b media M&A marketplace has been going gangbusters for more than two years now-and the party shows no signs of slowing down in 2007.

According to a survey released last week by media investment bank AdMedia Partners, 71% of media executives expect their companies to participate in a deal this year. The media investment banking firm's third annual Top Management Survey was conducted in November at American Business Media's Top Management Meeting in Chicago.

The B2B Media Merger and Acquisition Activity Expectations survey is available for download here.
-Mark M. Edmiston, Managing Director

"As advertisers spend more money online, they are increasingly open to being served by a new host of players," says Seth Alpert, managing director of AdMedia Partners, an investment bank that represented both Genex and New Media Strategies in the Meredith acquisitions.

Meredith began the transition in the late 1990s, producing custom and Internet-related publications for companies that include clothing retailer Charming Shoppes, DaimlerChrysler, Carnival Cruise Lines and Century 21. These publications are largely marketing tools. For Charming Shoppes, for instance, owner of the Lane Bryant, Fashion Bug and Catherine's retail stores, Meredith produces a magazine for plussized women called Figure. Eventually Meredith realized it could do more for those clients in the newmedia area if it acquired an agency. "With (Meredith's) custom publishing business, these guys are asking themselves, "What is this business really? Isn't that marketing?" Mr. Alpert says.
-Seth R. Alpert, Managing Director

"The internet changes everything," [Seth Alpert] said. "In a domain like the internet -- which is rapidly evolving, changing dynamically and still in a very formative or amorphous state -- the opportunity and the temptation to grow the relationship with the advertisers is more compelling than it ever would have been in the offline world.

"I'm not really going to speculate about who's next," Mr. Alpert added, "but I do think that this is a pair of transactions that is going to have a lot of people in media companies thinking 'What is this strategy?' and 'Should we be considering it?'"
-Seth R. Alpert, Managing Director

Yet for a holding company like Publicis or Havas, the prey is becoming scarce. Many of today's top digital shops were snapped up during the first Web boom, investments that are finally paying off. What's more, holding companies will find private equity firms and other industry outsiders vying to establish a beachhead in advertising, predicted Seth Alpert, managing director at AdMedia Partners. "What we're seeing is that there are new competition to holding companies in these acquisition races," he said.
-Seth R. Alpert, Managing Director

Mark Edmiston, managing director of AdMedia Partners, said 2006 not only marked the dominance of private equity, but also the resurgence of b-to-b. "B-to-b had been the quietest corner of the media market for years," he said. "The bubble burst after the recession of 2001 and that looked like the end of b-to-b. But now you have a company like Wasserstein that's put together almost a billion-dollar b-to-b company."

Edmiston says b-to-b is gaining interest from private equity firms that have found the b-to-b model to complement the new publishing model that is dominated by the Internet. "A lot of these companies are finding success in using the Wall Street Journal's model, which says if you want news go to our Web site and, if you want analysis, read our newspaper," he said.

On the consumer side, both [Scott] Peters and Edmiston said a lot of strategics, like Primedia, Time Inc., Hachette-Filipacchi and Hearst, are closing or selling off non-core assets, in many cases to private equity firms, as they shift their focus to digital media.
-Mark M. Edmiston, Managing Director

Publicis' acquisition of Digitas offers a rare glimpse into the real market value of pure-play digital agencies. . .

"The deal reflects the scarcity of pure-play interactive marketing companies of any significant size," says Abe Jones, managing director at AdMedia Partners, a New York investment bank specializing in ad industry deals. "There's aQuantive and the independently held AKQA."
-Abbott C. Jones, Managing Director

Both [marketing services and digital space] are expanding much faster than traditional advertising, as marketers increasingly demand ad approaches whose effectiveness can be more easily measured than conventional TV or print ads. That environment "argues for acquisitions in online and direct-marketing disciplines such as direct-response TV, direct mail and performance marketing," says Abe Jones, a managing director at New York's AdMedia Partners, a boutique investment bank specializing in marketing transactions.
-Abbott C. Jones, Managing Director

"This really is a sea change in how newspapers design their staffs to accommodate the Internet and what readers are expecting," said Charles Wrubel, managing director of AdMedia Partners, an investment bank.

AdMedia Partners Director Jay Kirsch added: "Public market valuations for media companies are below 10 times EBITDA [earnings before interest, taxes, depreciation and amortization], and a few years ago, they were 12 to 13 times. Combine that with large amounts of private equity available and low interest rates, and it's the perfect recipe."

Charles Wrubel, managing director of AdMedia Partners, an investment bank specializing in media properties, said it was unlikely the Times would sell the Globe, which it purchased in 1993 for $1.1 billion.

"The New York Times is not about to give up on New England and the Globe," said Wrubel, who said his firm doesn't consult for New York Times. "It reaches a wonderful, bedrock intellectual reader."

"You start hearing, 'I'm in charge of all applications,' and the businesses are too different," said Mark Edmiston, managing director, AdMedia Partners. The brand steward should play a protective rather than entrepreneurial role, he continued. "They shouldn't be telling people what to do, but they should be telling people if is consistent with the brand image."
-Mark M. Edmiston, Managing Director

"Clients are demanding that there be an allocation of online to the budget," says Seth Alpert, managing director of media-investment house AdMedia Partners. For agencies, such demands translate into a mandate to beef up interactive capabilities. "It's not just nice to have it. They have to have it," Alpert says.
-Seth R. Alpert, Managing Director

WWE's editor, Tony Romando, said that past W.W.E. publications had an intense following, but "were like a zine," fanatically devoted to what happened in the ring, and printed on less-attractive paper stock. In the new magazine (which will carry a pumped up newsstand price of $5.99), rather than simply review "the greatest razors for the season," he said, "we have a wrestler who dresses in drag, why not have him test the razors and serve two masters at the same time?"

Mark Edmiston, managing director of AdMedia Partners, financial advisers to magazines, struck a note of caution. While he said he understood why W.W.E. would want to expand its fan base, "the more they broaden and try to compete with FHM and Maxim the more they are competing with people who are established, and do it really well."
-Mark M. Edmiston, Managing Director

Seth Alpert, managing director of AdMedia Partners, an investment banking and financial advisory firm, expressed some surprise at the deal, noting IPG's recent financial woes: "It's interesting that they would invest in what is arguably a media company rather than deploying that money in acquisitions to strengthen their core business. I'm a bit surprised because they haven't been an active party on the M&A front."

That said, Alpert agreed: "Of course everybody's interested in how user-generated media are going to become a significant advertising platform. There's a huge audience, and it's very interesting and attractive space."
-Seth R. Alpert, Managing Director

"Magazines of this type usually are valued in the high single digits to 10 times operating income," said Mark Edmiston, managing director of Admedia Partners, Inc., "a media investment banking advisory firm that is not involved in the American Media titles."
-Mark M. Edmiston, Managing Director

"You have to become a content company," says Mark Edmiston, managing director of AdMedia Partners, Inc., a mergers and acquisitions firm. "You can't make money anymore selling ad pages and giving away circulation."
-Mark M. Edmiston, Managing Director

World Publications LLC, a travel and luxury-lifestyle publisher, traded financial sponsorship for a strategic partner Monday, May 22, in an estimated $70 million deal that managed to satisfy everybody...

"You used to be able to wait five years for the magazine to make money," said Polly Perkins, business-development director at AdMedia Partners. "Now you've got to say to yourself, 'Is it fair to wait five years when some of those dollars should be spent on interactive platforms for brands that are already profitable?"'
-Polly Perkins Johnson, VP Business Development

"American Media needs to boost cash flow to service its debt, so that's why Celebrity Living shut down," said AdMedia Partners' Mark Edmiston. "And with Cargo, there are enough shopping magazines already, and aiming one at men was a bad idea."
-Mark M. Edmiston, Managing Director

These banks have been allowed to grow up under their hulking counterparts on Wall Street because they set themselves up to handle smaller deals. "Most of the stuff we do, they can't afford to do," [Mark] Edmiston says of bulge-bracket firms, which have maintained a lock on big-media deals involving Hollywood studios, broadcast networks and cross-media hybrids like America Online Inc. and Time Warner Inc.
-Mark M. Edmiston, Managing Director

"They've got a very tough situation," said Jay Kirsch, a vice president of AdMedia Partners, an investment banking and advisory firm for media companies. "They're fighting two very deep-pocketed companies who are also very established brands. And their niche as a data provider has been taken on by a lot of online sources."

2005 Deal of the Year
At $35 million, it wasn't anywhere near the year's biggest deal. But the fact that it took only 29 days - from selling decision to binding transaction - Joe Mansueto's acquisition of Inc. and Fast Company was by far the quickest...

"Search remains extremely hot as an acquisition category. If anything, demand might be stronger than before because traditional media companies within the larger game are realizing search is an incredibly important part of media," said Seth Alpert, Managing Director of AdMedia Partners in an interview with StepForth, "They have to be planning and buying for clients but don't have internal knowledge or staff to do it."
-Seth R. Alpert, Managing Director

AdMedia Partners VP Jay Kirsch said, "The all-time-low interest rates of high-yield debt-currently hovering around 8%, compared with 12% in 2002 and 14% in 2000-have helped drive the dizzying pace of b-to-b deals in the past two years. But the rates on high-yield debt will inevitably bounce back making it more problematic for b-to-b publishers and private equity players to borrow money real cheap."

"I think the biggest change we've noted is that there is a strong expectation that there will be a much higher level of activity in categories like interactive, direct and experiential marketing which we have not seen for quite a while," said Abe Jones, managing director at AdMedia.
-Abbott C. Jones, Managing Director

"It is widely recognized that marketers must look beyond traditional advertising to reach consumers, and right now Internet marketing, experiential marketing and CRM are capturing a sizeable share of both industry budgets and buzz. It follows that deal-making activity will be particularly strong in these sectors," says AdMedia Managing Director Abe Jones.
-Abbott C. Jones, Managing Director

"A lot of this confirms what we intuitively believe in: It's a very good year," said Seth Alpert, managing director of AdMedia. "In a broad sense, among potential sellers, this is a good time to go to market."
-Seth R. Alpert, Managing Director

AdMedia Managing Director Abe Jones says, of those who identify as prospective buyers, 54 percent expect to complete an acquisition during 2006, up slightly from 51 percent who thought they would do so in 2005. In a more dramatic shift, 42 percent of those who identify as prospective sellers expect to sell all or part of their businesses in 2006, vs. 25 percent who thought they would do so last year.

"It is widely recognized that marketers must look beyond traditional advertising to reach consumers, and right now Internet marketing, experiential marketing, and CRM are capturing a sizeable share of both industry budgets and buzz," said Jones. "It follows that deal-making activity will be particularly strong in these sectors."
-Abbott C. Jones, Managing Director

AdMedia Managing Director Abe Jones says, of those who identify as prospective buyers, 54 percent expect to complete an acquisition during 2006, up slightly from 51 percent who thought they would do so in 2005. In a more dramatic shift, 42 percent of those who identify as prospective sellers expect to sell all or part of their businesses in 2006, vs. 25 percent who thought they would do so last year.
-Abbott C. Jones, Managing Director

"Demand for digital content was clear in both the survey data and open-ended comments, and we expect to see more acquisitions of cross-media partners by traditional media companies," said Mark Edmiston, managing director. "Down the road, tightening of lending criteria and potential increases in capital gains tax rates could make M&A less attractive, but in 2006 conditions remain favorable."
-Mark M. Edmiston, Managing Director