Mergers & Acquisitions for Buzz, Viral, Guerilla & Event Marketing Companies.

According to a new market survey by investment bank AdMedia Partners, merger and acquisition activity for internet marketing firms will be remarkably strong in 2006. AdMedia’s survey also found that mergers and acquisitions of
“experiential marketing” companies — which includes buzz, viral, guerilla and event marketing firms — as well as database marketing and customer relationship management (CRM) firms, will also be strong this year.

The survey — Merger and Acquisition Prospects for Marketing Services and Internet Marketing Firms — shows that the valuation multiples that respondents anticipate for marketing services firms increased to 6-7 times EBITDA (pretax profit) from 5-7 times last year. The most notable increase in valuation parameters was seen for internet marketing firms, with anticipated multiples of 6-10 times EBITDA, up from 5-7 times last year. By contrast, valuation multiple expectations for traditional advertising agencies have held at last year’s level of 5-6 times EBITDA.

AdMedia Managing Director Abe Jones says, of those who identify as prospective buyers, 54% expect to complete an acquisition during 2006, up slightly from 51% who thought they would do so in 2005. In a more dramatic shift, 42% of those who identify as prospective sellers expect to sell all or part of their businesses in 2006, vs. 25% who thought they would do so last year.

While survey respondents are most optimistic about strong merger and acquisition activity in internet and experiential marketing, Jones noted that a majority also project moderate to strong merger and acquisition activity in database marketing and CRM, marketing and strategic consulting, specialist advertising, direct marketing, media buying services, corporate identity, design, sales promotion and public relations. The only sector in which a majority (55%) of respondents expect deal-making activity to be weak is general advertising.

“It is widely recognized that marketers must look beyond traditional advertising to reach consumers, and right now internet marketing, experiential marketing, and CRM are capturing a sizeable share of both industry budgets and buzz,” said Jones. “It follows that deal-making activity will be particularly strong in these sectors.”

In fact, 69% of respondents said they are considering entering or expanding their presence in internet marketing this year, up from 64% in 2005.

Nearly half (46%) hope to grow in experiential marketing, a sector which replaced event marketing in the survey this year. Only 28% of respondents said they were considering entering or expanding in event marketing in 2005.

As has been the case throughout the 2000s, the vast majority of respondents believe the current merger and acquisition climate is favorable for buyers, but for the first time in five years, a majority (52%) would now advise sellers to act as well. “Although a sizeable minority would still urge prospective sellers to hold off for higher multiples, a growing percentage think healthy valuations and available financing make this the right time to sell,” said Jones.

Respondents to AdMedia Partners 12th annual survey were made up of companies that operate in a variety of advertising and marketing services sectors. 52% are marketing services firms, 30% internet marketing firms, 26% ad agencies and 9% holding companies. 89% are private companies and 11% are public companies.

To view study CLICK below (Adobe Acrobat Reader required):

http://www.admediapartners.com/amp06-surveys/Prospects%20for%20Advertising%20Marketing%20Services%20M&A%20Survey%202006.pdf