Private equity chases smaller deals: UBM CEO

By Gavin Haycock

PARIS (Reuters) - Private equity dealmakers are increasingly targeting smaller acquisitions in professional publishing at a time of soaring valuations, squeezing out trade buyers, the chief executive of United Business Media (UBM.L: Quote, Profile, Research, Stock Buzz) said.

Some bids even appeared to have a lack of clear-cut synergies, David Levin told the Reuters Global Technology, Media and Telecoms summit on Wednesday.

"We are seeing people in private equity companies making bids this year for much smaller vehicles than they would have last year," Levin said.

"Clearly, we would like to make bigger acquisitions, but somewhere around the $100 million mark in transactions there is infinite capital available and the competition just goes through the roof for assets and the prices are phenomenal," he added.

United Business Media, which publishes Music Week and Property Week and runs exhibitions around the world, has regularly found itself at the centre of private equity bid speculation as well as market talk that it would sell its PR Newswire corporate press release business.

UBM has steadily been acquiring businesses, but Levin said the big sums chasing the limited number of deals had squeezed prices to levels he sometimes could not fathom.

"There are acquisitions at the moment which we have stood back from north of that $100 million level where there are 25, 30, 40 even in one case 50 people looking at the acquisition book," he said.

The CEO said UBM recently passed on one deal around the $100 million level that two private equity companies fought over even though there appeared to be no evident potential synergies.

CONSOLIDATION

Credit Suisse analysts said in a research note on Tuesday that business-to-business professional publishing remains the most fragmented area in the professional publishing industry.

"Consolidation is now even more critical in B2B, as the migration to online progresses," Credit Suisse said.

The broker added that it expects to see more defensive acquisitions, noting that post-synergies multiples in education publishing had jumped to 15 to 20 times forecast underlying 2007 earnings, compared with a current sector average of 12.6 times.

As the line between potential buyers and targets became increasingly blurred, Credit Suisse said that a re-rating of all professional publishers towards peak historical multiples of 17 times one-year forward underlying earnings was likely.

"We are going to keep looking because it would be wonderful to do a bigger deal and we have got the horsepower to do that but we have got to be quite measured in the way we do that," said Levin.

He added that professional publishers were enjoying renewed market interest thanks to robust financial markets, their cash-generating characteristics and recent big bid pitches such as News Corp.'s (NWSa.N: Quote, Profile, Research, Stock Buzz) $5 billion bid for Dow Jones & Co. DJ.N and a raft of other deals in the sector around the world.  Continued...