Content Matters

Down markets bring consolidation and with little M&A activity, the advisory market was due for some teaming up. Two deals were announced earlier today.

Jed and Chris Laird, formerly partners in Laird Squared, have joined boutique investment bank Petsky Prunier, where they will lead its Information Services practice. Jed Laird was a mainstay in the content industry, originally as an analyst at H&Q, then in a leadership role at VSA before forming Laird Squared. Christine Balcius Laird, a co-founder of Laird Squared, previously served as an associate with Veronis Suhler & Associates.

Meanwhile, M&A advisory firm Berkery Noyes has teamed with restructuring advisory firm Seneca Financial to advise middle market media and publishing companies on restructuring. Restructuring is likely to be the only growth segment in the M&A market for a while, and this move makes a lot of sense for Berkery.

The fourth quarter brought a marked decline in transaction activity for the marketing, advertising and digital media industries, according to the latest deal report from Petsky Prunier. During the quarter there were a total of 140 transactions worth a total of $4.7 billion.

While deal volume had been declining throughout the year, the fourth quarter numbers represented a drop of 42% from the same period in 2007 and was down 27% from the third quarter. Two deals accounted for roughly half the total - China-based Sina's purchase of Focus Media's Out-of-home media assets for $1.3 billion and eBay's $945 million acquisition of Bill Me Later. In all, strategic  buyers accounted for $3.4 billion (72%) of the total, while venture investors closed 78 deals for a total of $1.1 billion. Almost out of the picture were private equity firms, completing only five deals in the sector during the quarter, due to challenges in the credit market.

Online reference site HighBeam Research has been acquired by educational publisher Gale.

HighBeam was founded by Patrick Spain in 2002. The initial platform was built on eLibrary and encyclopedia.com, which were acquired from domain registrar and hosting provider Tucows. The company was originally called Alacritude LLC, combining the terms alacrity and attitude (quick: can you name another content technology company whose name was derived from alacrity?)

The company recast itself as HighBeam Research a few years later and repositioned itself as a search engine for researchers and students. With a modest $100 annual subscription fee, HighBeam sought to fill the space between the free web content and high-end information services. More recently, HighBeam has leveraged an affiliate program with special tools for publishers to generate additional inventory to run ads. Throughout its existence, HighBeam has experimented with various technologies, processes, business models and methods, tweaking until it found the right mix.

Congratulations to Patrick Spain and the HighBeam team. Patrick has long been an innovator in the content industry. Excluded from the transaction is the Newser site, which Patrick and his team will continue to run. I look forward to continued innovation on Newser and to see what markets Patrick tackles next.

Forrester Research (NASD: FORR) has acquired competitor Jupiter Research from MCG Capital for $23 million.  According to the release issued by banker Jordan Edmiston Group, Jupiter, with 87 employees, had 2007 revenues of $14 million.  Forrester reported $212 million in revenues last year and has more than 1,000 employees following the deal.

Jupiter will be folded into Forrester's Marketing & Strategy Client Group, which helps technology marketing and strategy professionals develop strategies for ebusiness and interactive marketing.

The IT consulting business, which had boomed during the 90's, has struggled to reinvent itself since. The industry has faced two primary challenges:

• First, much of their growth was driven by the freespending ways of the dot coms. It was the "cost of entry" for a startup to pay $50-75k per year each to Gartner, Forrester, IDC and others. While the technology market has recovered from the dot-com implosion, purse strings are managed a little more tightly and the pay-to-play business has suffered.
• At the same time, the IT analysts have lost much of the influence they once held. Alternative media like Mashable and TechCrunch have filled the space once dominated by the IT analysts; while they still play an important role in the space, they can no longer command the premium dollars they once did.

Jupiter and Forrester focus largely on strategy consulting, which is less sensitive to the competitive market changes, but a quick look at a ten-year price chart for Forrester shows the challenges they face.