Sunday, May 8, 2005

The VSS Cashout: Selling at the Top of the Market, but What's Next?

Folio Magazine's review of media merchant banker Veronis Suhler Stevenson's pending spinoffs of business media companies Canon Communications and Hanley Wood notes it as an event marking the end of an era for a financier that was riding high on these and other acquisitions. With multiples expected to reach 12x earnings, VSS is getting great value from these properties just as the ad markets are peaking and events are riding high again. This underscores the importance of one of our 4"C"s of major trends for 2005 - Consolidation - as major properties in business media this year, but also underscores the long-term challenge of investment companies chasing media deals in a market where core value propositions are changing rapidly.

Like many media investors VSS is faced with the challenge of timing a market for business media properties that is unlikely to see a continuation of the current buying frenzy much past the end of the year. A lot of business publishers floating down the river very happily this year will be facing pressures for online business titles to become tied to "vertical search" capabilities - beginning to force revenues into new patterns that are not likely to favor the traditional title-centric publishing model for top ad revenues much longer. These are changes happening gradually, so it's certainly too early to call for a clear path to the exits, but those publishers hoping to enjoy a seller's market indefinitely may find the environment much less friendly sooner than they think as pressures that have engulfed newspapers this year begin to gain steam in influencing the fate of business publishing. Kudos to VSS for giving and getting good value at a great time - and freeing up cash to ride out these changes and to prepare for new patterns of investment at more favorable buyer's multiples.
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