Top deals of 2008: it may have been the year that deals didn't get done but 2008 rewrote the rules for what makes an attractive acquisition—and what doesn't

Folio: The Magazine for Magazine Management, Feb, 2009

From boom to bust describes media transactions in 2008. Private equity buyers, which dominated the media deal landscape for the last five years, suspended their buying spree while strategic buyers picked over the few smaller deals that could add value to their companies. Large publishing deals, such as the attempted sale of Reed Business Information, were postponed until the market improves.

Both deal volume and deal value shrank dramatically. There were 22 deals worth a combined $417 million for b-to-b magazines in 2008, compared to 41 deals worth $5.1 billion in 2007, according to the Jordan, Edmiston Group. There were more deals for consumer magazines last year at 42, but for less money at $192 million, compared to 56 deals worth $6.9 billion in 2007, according to JEGI. Even deals for online companies weren't immune. While publishers still sought out online startups, the number of digital deals in 2008 was flat compared to 2007, according to DeSilva Phillips, and down 18 percent according to JEGI. Data information services were the lone bright spot, with the number of deals soaring.

FOLIO:'s top deals of 2008 were chosen not so much for their size but for how they represent the M&A atmosphere in publishing: Fewer sales, more mergers, sales of non-core assets and a growing demand for data services.

Randall-Reilly

Buyer: Investcorp

Seller: Michael Reilly, Wachovia Capital Partners

Price: $150 million (estimated)

Date: January 2009 (closed in first quarter)

TAKEAWAY: One of the few traditional media deals of 2008 involves a publisher looking to develop data businesses.

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The first month of 2008 saw one of the few $100 million-plus traditional publishing deals of the year, with Tuscaloosa, Alabama-based trucking and construction publisher Randall-Reilly selling to global investment firm Investcorp.

But even this deal wasn't a typical sale. Randall-Reilly CEO Mike Reilly characterized it as being closer to an equity sale, rather than strictly a sale of the company. The management team remained in place. "We're exchanging equity partners," Reilly said at the time. "Our growth was substantial enough--EBITDA almost doubled from where it was two years ago--that Wachovia felt like they reached their goals. Investcorp recognized there was still plenty of gas left in the tank for the next few years."

The deal was a relatively quick flip in that Wachovia Capital Partners and Reilly had purchased the company in 2005 from the Randall family in a deal estimated at $75 million.

At the time, Reilly expected double-digit growth from Randall (which generated more than $70 million at the time of the deal) over the next five years. "I'd like to generate somewhere close to a $50 million EBITDA company," he said.

Data has been a priority for Randall-Reilly. While print revenue accounted for 90 percent of the publisher's revenue in 2006, it accounted for closer to 60 percent in 2008. "Everything is still centered around our print products and we've been successful by realizing that our print products get us in the door but what keeps us there is everything else we can offer," Reilly said. "Our ultimate goal is to help our customers find and keep customers. We can do that more effectively if we use our data, print, Web and event products."

COMMENTS: "The surprise here is that Wachovia purchased the company just two years ago. It was a relatively quick flip."

TV Guide

Buyer: OpenGate Capital

Seller: Macrovision

Price: $1

Date: October 13

TAKEAWAY: In one of the strangest ; deals in recent history, Macrovision agreed to sell TV Guide to California investment firm OpenGate Capital for--get this--$1, or less than half the price of a single issue.

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Only six months after Gemstar-TV Guide stockholders approved the company's merger with Macrovision for $2.8 billion, the Santa Clara, California-based digital software solutions firm divested the print edition of the TV Guide brand to investment firm OpenGate Capital.

What's interesting about this deal is the sale price: $1. According to SEC filings, Macrovision also agreed to loan OpenGate up to $9.5 million at a surprisingly low 3 percent interest. Macrovision effectively paid OpenGate to take the magazine--which was saddled with hefty financial troubles and had undergone a dramatic design and content change in 2005--off its books.

In December, Macrovision said it agreed to sell the TV Guide Network and TVGuide.com to Allen Shapiro and One Equity Partners for an initial payment of $255 million, and up to $45 million more in earn-out payments through 2012. Less than a month later, the company called off that deal and decided to sell the network instead to film entertainment studio Lionsgate for $255 million.

According to Corey Ferengul, executive vice president of marketing, Macrovision plans to retain Gemstar / TVGuide's worldwide interactive program guides, extensive entertainment metadata, a strong patent portfolio, and emerging mobile business. It also still owns the TVG, Interactive Horseracing Network but may seek a buyer for it, Ferengul says.