BtoB Media Business - June 2007 - (Page 18)

M&A Thomson-Reuters big deal $17.2 billion deal would create a financial data powerhouse larger than Bloomberg M&A BY MATTHEW SCHWARTZ ANALYST INSIGHT Buyers being more selective W ith the media M&A market continuing its torrid pace—and prices getting a bit frothy—buyers are becoming more discriminating, said Carolyn Armbrust, manager of Willamette Management Associates, which provides valuations for middlemarket companies. “Private equity firms and hedge Carolyn funds are looking for Armbrust independent valua- Willamette Management tions to give them a Associates reality check and to TIPS further satisfy Do: Sellers investors that they’re should take time to shore not getting caught up intellectual up in the deal,” property Armbrust said. assets, such as With price multi- solidifying key relationships ples heating up for with strategic media properties, partners and buyers must take a suppliers. closer look at current Don’t: Buyers shouldn’t disrisk factors, she said. miss a questionForemost among able opportunithese is the growing ty just because it doesn’t exactwedding of media ly fit their acquiand technology. sition criteria. “With media intertwined with technology, the risks are much higher in terms of quicker obsolescence of revenue streams,” Armbrust said. “Do buyers go after blogs, e-commerce? Or should they wait for the next hook? They have to ask themselves: Do I buy for the short term or the long term?” In previous bullish M&A markets, before the Web became such a force, buyers were looking for solid cash flows and growth, Armbrust said. But with the explosion in the number of electronic media channels, buyers “have to take a much harder look at all the specific opportunities” afforded by online assets, she said. —Matthew Schwartz I f the Thomson-Reuters deal is approved it will dramatically alter the landscape for the delivery of business news and information, analysts say. Toronto-based Thomson Corp. on May 15 agreed to buy London-based Reuters Group for $17.2 billion. Should the deal meet with shareholder and regulatory approval, which could take a few months, the combined entity would surpass Bloomberg as the world’s largest provider of financial data. It would hold a 34% market share, compared with 33% for Bloomberg, according to Inside Market Data Reference. “Steep price aside, it’s a great combination and a very powerful one over the long term,” said Scott Peters, a managing director at media investment bank Jordan, Edmiston Group. Peters said the combination would have a ripple effect on other business information providers. “It moves from being fragmented to a powerhouse that can give Bloomberg a run for its money.” He added that companies such as Dow Jones & Co. and McGraw-Hill Cos. “have some things to think about.” On paper, the merger appears advantageous for both companies. It would boost Thomson’s financial services business and reduce Reuters’ exposure to cyclical advertising. The combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters. Thomson’s professional businesses—legal, health care, scientific, and tax and accounting—would be called Thomson-Reuters Professional. Regulatory hurdles will not be easy to clear, according to analysts. “The regulatory issue is the fly in the ointment,” said Roland DeSilva, managing partner and co-founder of media investment bank DeSilva & Phillips. DeSilva added that combining Thomson’s and Reuters’ content is at the heart of the deal. “In order to transform the delivery system [of business information] you have to own content and the audience to make sure that the transition is effective,” he said. David Worlock, chief research fellow at market research firm Outsell Inc., said the deal is in keeping with marketers’ shifting demands. “Marketers are looking for large solutions and content provided by a handful of competing players,” he said. “It can also be two players, if that works.” Worlock said the Thomson-Reuters deal could have an impact on Dow Jones, which has deals to distribute its financial content through both Reuters and Thomson. With Reuters’ newswires added to its portfolio, Thomson may be less likely to distribute content from Dow Jones Newswires, Worlock said. “It definitely puts Dow Jones in a weaker position.” Dow Jones itself is being targeted for a takeover by News Corp., which has offered $5 billion for the company that publishes The Wall Street Journal. Several members of the Bancroft family, which holds 64% of the voting power at Dow Jones, have stated that they are against the offer, but News Corp. Chairman-CEO Rupert Murdoch has vowed to press on. A roundup of recent mergers and acquisitions M&A ACTION Date Property 4/7 Construction/ Industrial division 4/7 National Incentive Show eFinancialNews Description Divison’s assets include Construction Purchasing, Contractor Tools and Supplies, MRO Today and Progressive Distributor and their respective Web sites Event focused on incentive, motivational and promotional marketing products and services Publisher of Financial News and eFinancialNews.com, a subscription-based Web site Seller Summit Business Media Buyer Milo Trade Media 4/7 Reed Touchstone Exhibitions Exhibitions & Conferences eFinanDow cialNews Jones& Co. Source: Jordan, Edmiston Group Inc. Transaction Database, 2007 18 | Media Business | June 2007 | mediabusinessonline.com http://mediabusinessonline.com

Table of Contents for the Digital Edition of BtoB Media Business - June 2007

Cover
Contents
ABM meeting reflects sense of urgency
Publishers consolidate Web site management
Five key technologies to watch
Sales & Marketing
M&A
Online
Events
Circulation
Production
People
Benchmarks
‘Wall Street Journal’ fosters younger audience

BtoB Media Business - June 2007