New York -- Media-industry mergers and acquisitions,
if they maintain this year's heady pace, could more than double the 1997 M&A
total of $77.7 billion.
But last year's result was miserly when compared with
the $110.5 billion boom in 1996.
That forecast and the look back came from the latest
edition of investment bank Veronis Suhler & Associates Inc.'s compendium of
industry transactions.
While the 1998 surge is artificially pumped up by the $48
billion AT&T Corp. buyout of Tele-Communications Inc., there are also Seagram
Co.'s $10.4 billion acquisition of PolyGram NV and Viacom Inc.'s $4.6 billion
sale of Simon & Schuster Inc. to consider. And, noted VS&A president John Suhler,
the AT&T-TCI deal could very well inspire other communications deals.
VS&A -- which tracks publicly reported deals -- figured
that 1997 saw $115.5 billion in media deals, including public stock and debt offerings,
private placements and debt redemptions. That was the second straight year above the $100
billion level.
But it was down from the dazzling $139.2 billion mark set
in 1996, when The Walt Disney Co. bought Capital Cities/ABC Inc. for $19 billion; U S West
Inc. bought Continental Cablevision Inc. for $10.8 billion; and Time Warner Inc. bought
Turner Broadcasting System Inc. for $7.6 billion.
On the price side, the revenue multiple for media M&A
deals averaged 4.5 in the 1996-97 two-year span, versus a 3.0 multiple averaged across the
three prior years (1993-95). The average cash-flow multiple in 1996-97 was 14.2, up from
11.8 in 1993-95.
Electronic-media revenue multiples grew more strongly than
those in print-media deals. In subscription-video deals, including cable mergers and
acquisitions, the revenue multiple rose to 4.3 in 1997 from 2.2 in 1993. For TV
broadcasters, the average revenue multiple rose to 6.5 from 2.4 over that period, and the
radio revenue multiple rose to 5.3 in 1997 from 3.7 in 1993.
For cable companies, 1996, with deals totaling $22.8
billion, was a lot bigger than 1997 ($8.3 billion). No major MSO got sold last year, while
Continental, Viacom Cable and Scripps Howard Cable were sold in 1996.
Still, VS&A counts six deals worth $500 million or more
in each year. TCI and Time Warner were active sellers, as they tried to enhance clusters.
And participation by financial investors was a key trend that extended into this year:
VS&A noted that The Carlyle Group -- a boutique investment firm in Washington, D.C. --
was the lead investor in the deal to buy SBC Communications Inc.'s cable systems in
that area.
Over the 1995-97 span, the average cash-flow multiple
declined to 10 from the 11 multiple averaged over 1993 and 1994, as operators felt the
pinch from reregulation and satellite competition. VS&A calculated that the cash-flow
multiple of 1997 deals averaged 9.4, versus 10.8 in 1996, although VS&A was not able
to obtain cash-flow figures for more than one-half of the deals that it reported.
Cable-network deals last year managed to top the 1996
figure, despite the Time Warner-Turner deal. Of course, USA Networks changed hands twice
last year, as Seagram Co. bought partner Viacom Inc. for $1.7 billion, and it then sold
USA and other assets to Home Shopping Network Inc. for $4.1 billion.
The 1997 revenue multiple in cable-network deals averaged
4.4, up from 2.3 in 1995 and 1996. The operating-cash-flow multiple was 17.5 in 1996 and
17.8 in 1997, up from 10.8 in 1995.
