Publishing

Mixed results highlighted M&A activity during 2008. In the newspaper sector, the number of deals and deal value were both down. Only 16 daily newspapers were sold last year in 11 deals valued at $883.6 million compared to the 91 dailies sold in 2007 with a value of $20 billion.

A number of deals failed to close last year due to lack of funding, not lack of buyers. The pullback by lenders and a significant slide in advertising revenue during 2008 contributed to lower valuations compared with prior years. The drop in ad revenue and loss of subscribers was evident as major newspapers across America closed, restructured or filed for bankruptcy. The Rocky Mountain News shut its doors in February 2009, the Chicago Tribune and Los Angeles Times both filed for Chapter 11 bankruptcy and the Seattle Post-Intelligencer ceased its print operations and transformed itself into an Internet-only news source.

The trend for U.S. newspapers is to make more effective use of multiple media in order to retain loyal readers and lure new ones. Incorporation of video into the publication’s online edition has proven successful as many newspapers work to achieve a greater Internet presence. In some markets, daily newspapers and TV stations have partnered to form a comprehensive news source that benefits firms, readers and viewers.

Publishers have also discovered they must incorporate specialized information into their general news publications to meet a growing demand from consumers and advertisers. As advertisers look to place their money in a variety of media, opportunities exist for the publishing industry through consolidation of print and online assets.

In 2009, M&A activity increased for newspapers. Seven daily newspapers were sold in the first quarter despite worsening economic conditions.

M&A activity in 10 other publishing categories showed an increase in the number of deals and a decrease in the deal volume for 2008. Reports from Whitestone Communications shows there were 525 deals, up 16 percent from 2007, while dollar value dropped from $55 billion in 2007 to $25 billion last year.

In the trade and consumer magazine sub-sector, 97 deals were closed with a deal value of $930 million. In 2007, those same categories had 85 deals valued at $7.5 billion.

SOURCES: Global Media & Entertainment Outlook, PricewaterhouseCoopers; Moving Into Multiple Business Models: Outlook for Newspaper Publishing in the Digital Age, PricewaterhouseCoopers; M&A Deal Pace Cools in Fourth Quarter But 2008 Full Year Beats 2007, Whitestone Communications, Inc.