At the very top of the media tree, higher even than your company chairman, is a group of individuals who control the buying and selling in media. Media Week's Steve Hemsley sheds some light on these invisible power brokers.

Type the word “media” into the search box on the British Venture Capitalist Association’s website and you’ll discover that a whopping 98 investment firms are gagging to open their wallets to fund this sector.
The predicted improvement in advertising revenues and the relaxation of media ownership laws under the Communications Act have got the money men salivating.
Media excites them because they perceive it as glamorous and sexy. But it frustrates them because it is some what risky. Media’s economic cycle is widely accepted as being twice as intense as that of other industries. As a rule of thumb, if the stock market rises or falls by, say, 10%, media stocks will usually jump or dip by around 20%.
Specialist lawyer Nigel Edwards, of Lewis Silkin, says there has been a surge in deals since the end of the summer. “We’re not yet back to the heady days of 2000, but buyers want to buy before a full-blown recovery feeds into higher profits and the subsequent higher valuations.”

But who are these buyers? The money men who control media’s purse strings tend to work for one of the big investment banks, a specialist broker or a venture capitalist firm and their decisions can have a massive impact on those working in our industry.
The mergers and acquisitions they oversee involve millions of pounds and the judgements they make can put people’s jobs at risk as most deals prompt a round of cost-cutting somewhere.
Alternatively, their deal-making can provide new career opportunities as money is pumped into what becomes a larger organisation with new subsidiaries and better promotional prospects.
These financial high-flyers are not as invisible as you might first imagine. The competitive nature of their own world means they appreciate the significance of networking and the importance of being the first to hear a whisper of any potential new business.
Whether they are schmoozing over gin and tonics in some of London’s most upmarket venues, or debating potential corporate partnerships during a round of golf, they need a close relationship with media’s top decision makers.

Take the team at HgCapital, led by director of media investments, Nick Martin. He runs a media club, which meets three times a year.
The 90-strong membership comprises 50% media business CEOs, 25% chairmen or owners and 25% finance directors, entrepreneurs and former media leaders. Oh to be a fly on the wall when they meet.
Kleinwort Capital, the independent private equity firm, which invests in businesses valued at between £10m and £100m, also runs a Deal Club where media movers and shakers can mingle.
Europe’s most prolific private equity investor in media is 3i, which has an investment stake in around 120 businesses. Its advisors regularly meet media executives formally and informally and they also work closely with independent corporate finance houses such as LongAcre Partners.

High-profile industry advisers
One of 3i’s most high-profile industry advisers seen at industry gatherings is David Noble. He was closely involved with the sale of magazine group Paragon Publishing to Highbury House Communications and the sale of the 41% stake 3i had in market information business Mori to Isis Equity Partners.
3i’s current portfolio includes independent TV production business Shine and Local Press, which was acquired from Trinity Mirror’s Irish Newspapers for £46.3m in a deal brokered in Glasgow by the head of 3i’s Scottish operations, Robin Marshall.

Olivier Wolf, partner and head of media sector corporate finance at PricewaterhouseCoopers, is another man with a bulging media industry contacts book, but he says deals these days tend to be finalised through formal auctions. “These auctions tend to be run by us or by one of the investment banks and it means all the bidders receive exactly the same information, which is only fair. There are certainly less cosy deals being done at The Ivy,” he says.

Another familiar face is David Elms, the corporate finance partner at KPMG’s media practice.
He has worked onmany important deals in the last few years including advising Border Television on the defence of the £116m hostile bid from Scottish Radio Holdings which led to the £151m recommended offer from Capital Radio. He also worked with Guardian Media Group on its hostile bid for Jazz FM.
During 2004 he has helped media agency network Havas devise a global restructuring programme.
At a time when some observers are getting excited about the media sector’s improving prospects, Elms remains somewhat cautious.
“We’re seeing a number of people talking up the market and there’s a sense that price expectations of some vendors are becoming unrealistically high,” he says.
Our experience is that companies are prepared to consider acquisitions – particularly around their core activities,” he says.
“However, they’re not yet prepared to consider expansive acquisitions beyond their core areas of focus, or countenance inflated valuations of business". Despite the networking and the wining and dining that can go on long into the night to thrash out the smallest financial details of any media merger or acquisition (M&A), deals do occasionally happen that catch everyone off guard.
The announcement in March that Informa Group and Taylor & Francis Group planned to merge to create a specialist publisher and events business called T&F Informa with a stock market valuation of £1.1bn, was one amalgamation that caught everyone off guard.
“How so many people never saw that one coming I’ll never know,” says one respected corporate financier. “It took the whole City by surprise. Compare that with the Capital Radio/GWR announcement which had been likely for ages.”
Whether it is a formal auction or a handshake on the golf course, the next 12 months could see a flurry of M&A activity.

Heavyweight merger
And what of that big recent merger between Capital and GWR? The news that the two radio heavyweights wanted to get into bed may not have shocked media investors following the relaxation of media ownership regulations, but it did push radio into the limelight.
The money men (and occassionally women) predict radio will outperform other media in terms of revenue growth over the next few years. The emergence of digital radio, which will allow a tighter segmentation of audience and benefit advertisers, is one reason for the excitement. Future media pairings could include Emap and Scottish Radio Holdings, and ITV and Scottish Media Group, say the experts.
Another area where investors are tipped to put more of their money is in intellectual property, such as in music and film libraries. For example, the ongoing consultation process concerning BBC Worldwide is being watched extremely closely, so expect a fierce battle to acquire any back catalogue or media property the corporation ultimately puts up for sale.
“With more media channels than ever before, quality content is in increasing demand and intellectual property is an essential sub-sector,” says David Bezem, media analyst at Close Brothers Corporate Finance. “It is where the smart money will go because intellectual property businesses have longevity as well as relatively predictable cashflows.”

At the other end of the investment scale there are entrepreneurial media businessmen and women who would love to attract even a few thousand pounds of third party funding to get their ideas off the ground.
One of the most influential and respected money men in media is Michael Benson-Colpi, founder of The St James Partnership.
The company is reluctant to fund new ventures – it prefers to specialise in the sale of established publishing businesses valued at between £5m and £100m – but Benson-Colpi urges potential publishing entrepreneurs working within existing media companies to keep in touch.
He says there is currently a shortage of young businesses worth investing in because many people had their fingers and their finances badly burned during the dotcom crash.
“To attract money you need a credible magazine proposition with sales potential of around £100mover the next 10 to 15 years,” he says. “Two examples of companies that have achieved this are IncisiveMedia and Northern & Shell.”

Cottage industry
He points out that anyone with a good magazine launch idea should not always need external funding. If an idea is sound, Benson-Colpi says, the business will grow as a cottage industry through advertising and subscription revenue, and from spin-off magazines and supplements. Incisive Media is a perfect example of how things should be done.

Tim Weller formed Incisive as City Financial Communications (CFC) with around £200,000 back in 1994 specifically to launch Investment Week which went on to win PPA Magazine of the Year in 1997.
In 1999 Weller sought a private equity investor to buy a minority share in his business and he persuaded Kleinwort Capital to purchase a 23% stake. Kleinwort’s managing director, Andrew Hartley, suggested to Weller over a drink one evening that he should acquire Timothy Benn Publishing via a £16m management buy-in and merge it with CFC to create a company big enough to float on the London stock market.
Weller agreed and the business floated in December 2000 as Incisive Media valued at around £71m.
“Traditionally private equity firms will not touch single title magazine publishers, and Tim Weller would probably have had to kiss investor butts to get them interested in his business 10 years ago.
“Now he has the money men swarming over him at media events because he has proved himself,” says Grant Murgatroyd, former editor of the private equity and venture capitalist magazine Real Deals and now editor in chief of training and media business Bladonmore.