Deals are up, but newspaper values a fraction of 2007

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It's been a busy year for buying and selling newspapers in the US, with 16 buyers, and 40 dailies changing hands.

Phil Murray, senior vice president of newspaper M&A firm Dirks, Van Essen & Murray says 2017 was the busiest transaction year in nearly two decades with 31 separate deals. He attributes the activity to independently-owned properties and small family-owned groups increasingly finding it difficult to operate effectively, and also the industry's focus on building regional publishing clusters meaning that more deals were often required when group owners decide to sell.

He says the sale of Civitas Media's newspapers - which were scattered across several states - required nine separate transactions involving nine different buyers.

The sale of newspapers to non-strategic buyers is becoming the exception rather than the rule. In 2017, there were 23 transactions involving single daily newspapers or small clusters of dailies/weeklies. Of these, 16 were acquired by companies that owned adjacent or nearby operations, Murray said.

"Buyers are looking for more scale in regions where they own newspapers," he says. "It's becoming increasingly difficult to operate smaller newspapers on a stand-alone basis."

The New Mexico-based firm expects the deal flow to continue at a similar pace "at least through the first half of the year". The number of dailies sold in 2018 is likely to remain similar to the experience of recent years, which has been within 50 to 80 per year. Valuations should remain steady and consistent with those over the past 12 months.

In total, 80 daily newspapers changed hands in 2017 in 31 transactions worth US$347.97 million ($444.5 million). The number of transactions eclipsed the record 2007 by one deal and was the most since 2000, when 53 transactions involving dailies occurred.

However, dollar volume is nowhere near 2007's $20.04 billion in transaction value, also a record.

The number of dailies involved in 2017 was the most since 84 changed hands in 2012. In that year, the sale of the Media General newspapers and Heartland Publications contributed to the large number. The dollar volume in 2017 was up from 2016's total of $198.81 million.

Murray noted that some of the most active acquirers continued to grow in 2017. New Media Investment Group made four acquisitions involving dailies, including the year's largest - the $120 million deal to buy 11 dailies from Augusta, Georgia-based Morris Communications. Adams Publishing, Hearst and Boone each closed three transactions that included daily newspapers.

However, one striking aspect of 2017 was the number of separate buyers that added to their holdings.

Dirks, Van Essen & Murray was involved in 19 transactions in 2017 that involved 40 daily newspapers and 16 different buyers, he said. Most of these were group owners that saw opportunity to grow in their regions, and some were independent or small owners.

Among the group owners, Lee Enterprises acquired the Moline, Illinois, Dispatch-Argus across the river from its Iowa newspapers to consolidate the Quad Cities. Hearst augmented it Connecticut holdings by adding newspapers in New Haven, Torrington and Middletown. The latter group included the Reynolds family in Huntington, West Virginia, which acquired a group of community newspapers nearby. Also, Mike Schroeder's Central Connecticut Communications, bought the Willimantic, Connecticut, Chronicle.

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