Media executives see small deals as key to future

* Big media looks for transformative deals at Sun Valley

* ABC Network sale talks likely among execs, financiers

* $500 bln of private equity cash to influence deal talk

By Yinka Adegoke

SUN VALLEY, Idaho, July 6 (BestGrowthStock) – Small-sized
acquisitions and strategic buys rather than blockbuster
multibillion dollar deals will be on the minds of the media
moguls and financiers who gather at this week’s Sun Valley
conference.

At the top of their shopping lists will be individual media
assets such as TV stations, radio companies and newspapers
rather than powerhouse takeovers similar to Comcast Corp’s
(CMCSA.O: ) acquisition of NBC Universal last year.

That transaction marked the biggest media story of the year
in 2009 and, like many of the industry’s notable deals, was
incubated here at the annual mountainside conference hosted by
boutique investment bank Allen & Co [ID:nN04140044]

BankStreet investment banker Scott Singer said this year’s
Sun Valley could possibly see more frenetic deal talk than in
the recent past, considering there is close to $500 billion of
private equity cash ready to be put into investments.

“TV network affiliates as well as radio stations are areas
where, by virtue of upside down capital structures and a
rebound in national and local advertising, the private equity
community has a high interest to put funds to work,” said
Singer. “These factors will likely lead to a substantial amount
of M&A activity in the coming months.”

TV stations will indeed be at the heart of the one of the
few potential big deals likely being discussed here: whether
Walt Disney Co (DIS.N: ) Chief Executive Bob Iger is ready to
sell ABC, which analysts value at around $10 billion.

“Networks have never been run tightly with a really
aggressive eye towards operating efficiently,” said Larry
Gerbrandt, principal at Media Valuation Partners.

“It’s not unusual for the private equity guys to come in if
they think they’re possibly coming in at the bottom of the
market, pick up the asset, restructure operations, make it a
lot more profitable and spin it out as an IPO or sell it at the
other end,” he said.

That could happen to ABC, Gerbrandt added.

AOL SCARS

But size is not all that matters for the modern media
mogul. Many are looking for deals to help their traditional
media companies cope with the transition of their customers to
various digital outlets, such as video game consoles and
iPads.

In particular, executives, who typically avoid the press
under Allen & Co’s rules, will likely discuss mobile technology
and social media.

“Something we’ve been spending a lot of time on is how do
we focus on Facebook, Foursquare or MySpace — the whole social
media,” said David Zavlav, chief executive of Discovery
Communications Inc (DISCA.O: ), shortly after arriving at the Sun
Valley Lodge. “People are going to spend more time on Discovery
if their friends spend more time on Discovery.”

Dennis Miller, a partner a venture capital firm Spark
Capital, which has stakes in Twitter and Internet TV company
Boxee among others, said traditional media executives are torn
between the possibilities that social media presents — and the
risk of a foolish investment.

“They’re still conflicted between seeing the post-AOL/Time
Warner scar tissue and the realization that ‘oh my god, my
consumers are in places we never expected, there are 450
million people on Facebook’,” said Miller.

How hot is the space? This year, mobile media & technology
transactions are up by 188 percent, according to Jordan
Edmiston. That includes small acquisitions by Apple Inc (Read more about Apple stock future.)
(AAPL.O: ) Yahoo Inc (YHOO.O: ), Google Inc (Read more about Google Stock Analysis) (GOOG.O: ) and Twitter.

“You’ll see some mid-size acquisitions of Internet
businesses in the hopes that it will help them transform, that
one of them will hit big. They will place bets, but they will
be relatively small bets,” said Jonathan Knee, an investment
banker at Evercore Partners.

Not all digital deals work out quite as hoped. News Corp’s
(NWSA.O: ) acquisition of social networking MySpace in 2005 has
become something of an albatross around his neck for CEO Rupert
Murdoch.

Not only has MySpace fallen behind rivals such as Facebook
and Twitter, but it is now widely speculated that Murdoch will
try to offload the social networking site.

Both Murdoch and his digital chief, Jonathan Miller, are
expected here and will likely listen to any interest from media
rivals or financial parties.

Murdoch has repeatedly denied plans to sell. But one factor
that could decide whether a sale materializes is whether
MySpace can attract another advertising deal similar to the
three-year $900 million deal it struck with Google in 2006.

That deal is believed to expire in August and new talks are
warming up, according to the Wall Street Journal.
(Additional reporting by Paul Thomasch and Alex Dobuzinskis)

Media executives see small deals as key to future