By Vincent Schuller
Last week, following intense deal discussions, Pearson sold the Financial Times group to the Japanese media group Nikkei. There was significant interest from other bidders like Axel Springer and commentators believe that the sale price exceeded Pearson’s expectations.
The acquisition of the FT was high profile, and is in line with increasing deal activity in the B2B media sector. The sector has seen a return to selective growth and there are a host of good quality assets around that are being looked at with interest by strategic buyers and increasingly private equity investors as well.
Trends in B2B media
The B2B media sector tends to be cyclical in nature, with spending decreasing sharply when the economy contracts, and recovering with the cycle, though with some lag. Within the sector however, some segments have done better than others. Business information is relatively robust, as are trade shows and academic journals. On the other hand, regional news, newspapers and paper directories have proven less so.
A number of trends are visible, changing the B2B media and especially the B2B information sector. These are providing opportunities for those that adapt their business models or improve how they deliver information and insights to customers:
– B2B media has transitioned from print to online, balancing changing user needs with a need to protect pricing and revenue models. This has seen clear winners and losers but many B2B media and information businesses have come through the transition
– There is a clear trend towards subscription-based revenue models, and this trend continues. Key drivers are a desire for financial predictability, customer retention levels and user expectations regarding content
– The way business users interact with information has changed and data is consumed both on a larger scale and more interactively, in a context of more readily available free information
– As the business world is more and more awash with data, and the value of data in itself is eroding, the value of insights from data is becoming more important. Answers, insights and workflow solutions rather than just data are becoming more important.
B2B media and information budgets among typical clients of the sector have not come back to the highs of a decade ago, but some sectors are seeing some real traction. The financial and health sectors for example seem to have found their taste for market, sector, economic and risk information again.
Increasing deal activity
With the selective return of growth in media and information spend; deal appetite is increasing at media groups like Thomson Reuters, Reed Elsevier, Bloomberg, Springer, Informa and others. This includes both disposing of non-core assets to willing buyers and boosting successful assets to increase share of wallet or geographical reach.
The FT transaction was an example of such a high profile deal showing that strategic buyers are willing to pay for quality B2B information businesses. Alongside the B2B information segment, the B2B events segment is seeing a similar increase in deal appetite.
Private equity firms have shown more limited interest in media deals than strategic buyers over recent years, but some too are now looking for good quality, scalable subscription based B2B media businesses.
Outlook for the sector
At a high level, some B2B media segments are likely to do better than others. Given underlying growth drivers in the end markets, and a continued need for data and insights, the financial and economic segments have a favourable outlook, as do the risk information and health segments.
At a more granular level though, providers that can create “currency” for the customer segments they serve (e.g. ratings, benchmarks), and providers of information critical to their customers’ workflow can be attractive. Getting the business model and the proposition right can make a business stand out in any of the B2B media segments.
Identifying attractive investment opportunities
Those B2B information providers that are able to deliver business information to professionals in innovative ways, integrating into user work-flow and allowing users to interact with the data should be well placed to capture a good share of spend. Those providers that achieve a subscription-based portfolio and meet real demand among their clients should do well.
Given that many quality assets are likely to be contested by media groups and financial investors alike, it is key for investors to understand the real value of a business. Commercial due diligence is a great means for buyers to understand whether a business can prosper in a market environment and competitive landscape. Apex Insight is well places to support both media groups and investors looking to acquire assets in the B2B media sector given the firm’s deep experience in the sector.