Economy, Clustering Create Climate For Deal-Making p.9

By: Robert Neuwirth Forget Dickens: 1997 was the best of times ? if you were selling a newspaper company.
The 616-page Veronis, Suhler & Associates Communications Industry Transactions Report for 1997 shows another stellar year for newspaper deals. The number of transactions rose to 67, from 42 in 1996, and the value of newspapers changing hands tripled to $7.5 billion.
Newspaper financing transactions ? acquisitions plus the sale and redemption of public debt ? totaled $19 billion. All told, newspapers accounted for almost 16.5% of the deal-making in the communications industry in 1997, a giant leap from a mere 4% in 1996.
"Everybody's repositioning themselves," said Kevin M. Lavalla, managing director of Veronis, Suhler. "There's been a lot of transactions following the clustering concept. That is certainly a driving factor."
Volume measures aside, price-earnings multiples dropped. On average, 1997 buyers of newspaper companies paid 12.2 times net cash flow, down from 16.6 in 1996. Revenue multiples dropped, too, to 2.4 from 2.7.
Lavalla pegged the decline in multiples to higher profits, a result of the continuing strong economy and lower newsprint costs.
"As the newspaper industry experiences tremendous growth, profitability increases," Lavalla said. "Higher profits mean multiples are going to drop down."
Last year was also a banner year for companies seeking to raise money. Journal Register Co. raised $130 million in a public offering and Central Newspapers raised an equal amount in a secondary stock sale. And seven newspaper companies dipped into the public market, selling notes to raise cash.
In sum, Lavalla said, "I don't think there's any question that the market for all media companies right now is at a peak. The question is, how long is it going to last?"
He added, "I think you will continue to see
a high number of transactions. Newspapers have the funds available to expand. They'll grow through acquisitions and swapping."
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?(copyrigh: Editor & Publisher July 11, 1998) [Caption]