More M&A activity expected

Folio: The Magazine for Magazine Management, August 1, 1995

The boom market of mergers and acquisitions in the magazine industry should continue apace in the coming year amid a mostly favorable business climate and the growing interest of financial players looking for sound investment vehicles. These are some of the findings of a media industry survey recently conducted by New York City-based AdMedia Corporate Advisors.

The survey - of 1,931 senior executives at media and financial organizations - also predicts more consolidation. Rising paper and postal prices will spur the sale of marginal titles to bigger entities, while smaller companies less able to absorb the impact of higher costs may decide to exit the business. The survey found that trade-publishing companies now sell at a median operating cashflow multiple of 7.5, while consumer publications fetch a median multiple of 7.6. Although this is the first such survey by AdMedia, managing director Paul McPherson says those multiples are two to three points higher than just one year ago. (The most coveted properties can attract bids of 10- to 15-times cashflow.) The growth of investment funds is driving much of the boom. "As more players become comfortable with cashflow-based companies versus asset-based companies, they become more inclined to invest in businesses like publishing," says Angelo Varrone, president and part-owner of Atlanta-based Shore Communications. Shore itself has a deal pending with Boston Ventures (see item below).