Sunday, May 15, 2005

VSS Hanley Wood Deal Stalls: Have the Exits Closed?

As noted in FOLIO Magazine, and as presaged in our earlier weblog entry and News Analysis, the latest M&A round of business media acquisitions seems to have hit a snag in the wake of downgrades of Ford and GM debt to junk status draining life out of the high-yield debt market. VSS may have to rethink its asking price for Hanley Wood, which they have been pushing to reach up to 16 times EBITDA, according to FOLIO, and the lengthening of the evaluation period required for buyers to consider shifting financial marketplaces opens up the possibility that cold feet will begin to prevail. We still stand by our earlier view that there's time for an orderly procession to the exits for those looking to flip their business media titles, but the more sober tone to finance markets now taking shape may focus both buyers and sellers on long-term strategies rather than short-term deal structure. From that perspective there's going to be a lot more pressure on both buyers and sellers to explain what the real outlook is for business magazines. This environment is not likely to favor publications that have taken their time to put in place elements in their online publications that can build online channels as a strong contributor to revenues and earnings. Hanley Wood's aggressive development of online titles will likely pass this test, but there is a significant body of publications that consider themselves tuned into the changes in the marketplace for business content that in fact have been dawdling along at a precariously slow pace of change. Just as the optimism of the M&A markets was too widespread before this latest speed bump, pessimism should be contained carefully to those publishers that have not developed aggressive online strategies. Perhaps the sky is not the limit any more, but there's plenty of good M&A business to be had on sober terms.
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