BtoB Media Business - October 2012 - (Page 15)

M&A A new deal TheStreet buys The Deal for $5.8M, combines marketing, news operations BY MATTHEW SCHWARTZ ANALYST INSIGHT Jeffrey Stevenson Managing partner, Veronis Suhler Stevenson M&A T he recent acquisition of The Deal should help bolster TheStreet’s subscription services as the financial media company faces growing competition from ad-driven websites. “The hardest thing to do is to build contentsubscription businesses,” said Elisabeth DeMarse, chairman-CEO of TheStreet. “In the admodel free content business, it’s offline dollars to digital dimes to mobile pennies, and that’s why I do think it is a bit of a preemptive strike to build a foundation where we have these very lucrative subscription products that have extraordinarily high retention rates.” In September, TheStreet announced it had acquired The Deal from private equity company Wasserstein & Co. for $5.8 million in cash. The move combines the two news operations, including content development and marketing re- DeMarse sources. William Inman, who took charge as editor in chief of TheStreet in March, will oversee the combined operation. The Deal Pipeline, an information subscription service and database, is being folded into TheStreet’s portfolio of subscription services, which includes Jim Cramer’s Action Alerts Plus, RateWatch and RealMoney. TheStreet said it is shuttering the monthly print version of The Deal and moving the brand to an all-digital format. “We’re shutting down the area of The Deal that was bearing all of the costs and keeping the lucrative part, which is the online database business,” DeMarse said. “From The Deal’s perspective, that makes a lot of sense. It’s just accelerating them into the shift from print to digital.” Kevin Worth, CEO of The Deal, will transition to president of The Deal, which will operate as a subsidiary of TheStreet. Founded in 1999 as The Daily Deal newspaper, The Deal reaches 40,000 business professionals, including senior-level bankers, law firm partners, private equity partners and hedge fund managers. TheStreet plans to incorporate The Deal’s content into The Daily Pipeline to increase sales to hedge funds, while The Deal’s sales force will start to offer content such as TheStreet’s Chat on The Street and Options Profits. DeMarse said the acquisition of The Deal will immediately add to cash flow on a pro forma basis. In the last two years, The Deal Pipeline grew at a 45% compound annual growth rate. “The Deal did an exceptionally good job of turning on a dime and transitioning their business into an information business, and they did it at just the right time,” said Reed Phillips, managing partner at media investment bank DeSilva & Phillips, which represented The Deal in the transaction. “We’re certainly seeing other print properties that have not developed their digital assets, and they’ve got a tough row to hoe in terms of what the future is going to be for those businesses.” Several factors driving pickup in dealmaking effrey Stevenson is managing partner of private equity company Veronis Suhler Stevenson. Media Business: To what do you attribute the recent surge in media M&A activity, particularly in the b-to-b media sector? Jeffrey Stevenson: It’s a combination of factors, including banks lending again. There are a lot more attractive deals on the market (and) multiples are higher; so sellers are finding that they can get deals done at better valuations. It’s the deal flow that’s generating the activity and the fact that the companies (being sold) are better quality than they have been in the past. Credit lines are loosening up at both the small end and upper end of the marketplace. Leverage levels are still conservative, but at least there is lending. The bank wholesale market is more active, so there’s more of a syndication marketplace for midsize deals. MB: What is your outlook for the remainder of the year? Stevenson: That flow is going to continue, particularly driven by some of the tax consideration for year-end. So I think there’s going to be a fair bit of activity in the fourth quarter. Inevitably, things will go into next year; there’s a large private equity overhang from funds raised pre-2008 that are coming to expiring investment periods, so (deal activity) is probably going to carry through the end of next year. J A roundup of recent mergers and acquisitions M&A ACTION Date Property Description 9/12 Slashdot, SourceForge, Suite of technology sites Freecode for tech professionals 9/12 RivalEdge Seller Geeknet Buyer Dice Holdings Listening platform that RivalEdge ALM Media provides online news and Properties information to attorneys Publisher of international BSI tax, legal, business and investment magazines CCH Inc. 9/12 BSI Source: Jordan, Edmiston Group Transaction Database, 2012 —M.S. mediabusinessonline.com | October 2012 | Media Business | 15 http://www.mediabusinessonline.com

Table of Contents for the Digital Edition of BtoB Media Business - October 2012

BtoB Media Business - October 2012
Table of Contents
Upfront
Cover Story
Special Report
Sales & Marketing
M&A
Production
People
Benchmarks
Endnote

BtoB Media Business - October 2012