New opportunities for future media deals, with recent market dip

Due to a lack of private equity finance, 2009 saw a dip in activity not seen since dotcom crash, reported The Guardian this week. It followed a recent PricewaterhouseCoopers report that revealed only 29 media deals were struck in the UK last year, a 36% year-on-year fall compared with 2008, with a value of €2.7bn (£2.39bn). What does this mean for media business owners?

Rose Lewis from Pembridge Partners explains how this provides new opportunities for those looking to sell, whether that be in the short- or long-term.

"The market should significantly pick up this year, but we will not see the same explosive growth as in 2006 and 2007 - after all, we are facing the lowest number of media deals since 2002," says Lewis. "We will not see a fast rebound in acquisitions this year."

Yet, she continues, there is some evidence that the market is improving - since two deals were announced this month. "And, after all - who can ignore the Cadbury deal this week!"

Chime recently acquired Pelham PR, and Tree (a data company), although "an indicative valuation on Pelham is 5.5x - which is not quite the heady valuations that vendors were used to, a couple of years ago."

Additionally, Cagney sold CST to media square for £430k, further showing that values are nowhere near as high as those of 2007.

So if valuations remain on this low level, Lewis advises, those considering the sale of their business might consider a different deal structure that rewards for future growth.

"For those who do not want to sell right now, it's vital to start thinking about preparing the business for the long-term and grooming it for the future, so that when valuations improve, the business is in great shape to sell," she adds. "This means that you will benefit from higher valuations when buyers come back to the market."

The businesses which were sold out of the last recession, she says, were some of the few that were in good enough shape to buy.

However, she points out, exceptional assets will always sell. These are the ones with strong growth, over a million in EBITDA, coupled with an outstanding management team, a strong client list, and excellent margins.

"Digital assets will also sell," she says, echoing PwC's claim that traditional media companies' need to go digital to drive deals later this year.

If you would like to know more about how Pembridge can help with the sale of your business, please email info@pembridge.net or call +44 845 2600 344.