Two investment bankers see vigorous M&A activity in 2004 and 2005.

Eugene Simonoff, president of his eponymously named investment banking firm in New York City, told NL/NL that he's been "as active as ever" in M&A deals in the newsletter and specialized-information industry.

"There is a surge in activity--extended to our kind of publications," he said. "Private equity groups have spurred activity. They have eagerly sought out sellers, approaching many companies who weren't even looking to sell."

Simonoff and other brokers reported last year that many sellers were unrealistic in the dollar figures they expected their companies could garner. Now he says that publishers have "learned to moderate their expectations to become more reasonable." That "reasonableness" will help drive M&A activity in the new year.

"As we start the new year," Simonoff said, "deals won't have the kind of multiples that we saw in the early 1990s"--a time which practically everyone agrees was the high water mark in the multiples newsletter sellers were getting.

Whitestone Communications

"Newsletter acquisition activity awoke from its recession-induced slumber and showed a marked increase in deals in 2004," reports New York City-based M&A advisory firm Whitestone Communications. Whitestone tracks acquisitions for its annual reference, Who's Buying Whom, a leading report on deals in the publishing, information and training fields.

"Newsletter publishers have weathered two major challenges to their business to re-establish themselves as attractive business models for acquisition," said Jenifer Lindenman, an associate at Whitestone.

"The first challenge was the internet--would newsletters have a life in the world of free information on the web--and the answer to this challenge has been yes for those publishers who have improved their editorial content and increased their delivery of information electronically."

The second challenge, Lindenman noted, was "overcoming the turmoil in the mail from following 9/11 and the recession that caused a drop in results for many newsletter publishers."

So now with the economy on the upswing and publishers learning how to live with--and, in many cases, profit from--the internet, newsletter publishers are again highly favored acquisition targets, Lindenman concluded.

The result is that the number of newsletter and directory acquisitions in 2004 rose to 29 versus 18 in 2003, while the dollar value increased ten-fold to $337 million from just $36 million.

$180 million is estimated price paid for Phillips International

Providing about half of the deal dollar value for all of 2004 was the acquisition of Phillips International for a price Whitestone estimates at $180 million. The buyers were American Securities Capital Partners and ACI Capital Co.

Other notable transactions of 2004 include the purchase of Thompson Publishing by James Finkelstein and the sale of the major parts of Brownstone Publishing, with the healthcare titles going to HCPro and the real estate titles going to the newly formed Vendome Group.

Simonoff, president, Eugene Simonoff & Associates Inc., 129 E. 69th St., New York, NT 10021, 212-288-3659, fax [phone], [e-mail]

Whitestone, 1350 Avenue of the Americas, #1200, New York, NY 10019, 212-957-7100, www.whitestonecommunications.com