We Play Matchmaker for Merger Candidates AMC, Scripps and IPG

New report lists media and ad companies as likely targets

Who's next? The recent spree of mergers and acquisitions doesn't appear to be at an end, at least not to the market-watchers at Barron's, who listed Mad Men and Walking Dead network group AMC as a ripe target for investors looking to get into the television game, along with Scripps Networks Interactive, the conglomerate behind the Food Network, HGTV and the Cooking channel. Also a potential bargain: Interpublic Group (IPG).

One of the reasons each of these companies looks like a strong candidate for acquisition is its ratio of enterprise value—the amount of capital it would take to purchase the company—to earnings. Buy low, sell high. So who might be interested in each of these organizations?

  • AMC: The network group has gone from strength to strength over the last few years with hits like Mad Men, The Walking Dead and Breaking Bad bringing in revenue not merely from subscribers and advertisers, but from third-party streaming service Netflix, which pays for season-old content of the flagship network's signature serialized dramas. That, in turn, drives live viewership. Morgan Stanley has been cautious about the company, emphasizing the inherent risk in buying a bunch of new shows (which Netflix has indeed done), but its long-term prospects, Morgan Stanley says, are good.
    Our pick for a nice boyfriend: Netflix, definitely. With a staggering market cap, It's a company with plenty of capital looking for a more stable revenue stream as competition heats up around its core businesses. It's not actually that much bigger than Netflix in revenue terms ($4.37 billion last year vs. $1.59 billion), but its main concern at the moment is off-the-books commitments that could be mitigated by the acquisition of a high-profile content company.
  • Scripps: Scripps' programs aren't the stuff of morning-after recaps, but so much of the network group is serious where-did-my-Saturday-go marathon viewing. Its Food Network routinely makes lists of most profitable properties and spinoff Cooking Channel is doing well. The Knoxville, Tenn.-based company keeps a low profile, even when its stock is fluctuating pretty severely, but it's still a little dinged-up from the Paula Deen scandal last June.
    Our pick for a nice boyfriend: Discovery Communications, duh. Discovery has already given the matter some thought, and its only other real competitor in the nonfiction space is A+E Networks, which it can't effectively partner with on a large scale because of A+E's ownership (the company is split between Hearst and Disney). So that leaves Scripps, which does the same business Discovery does incredibly efficiently and in several categories that don't entirely overlap with existing programming at the larger network group.
  • Interpublic Group: Before Publicis Groupe's aborted deal to merge with Omnicom Group—and create a new advertising colossus with a combined $24 million in revenue—Publicis considered acquiring Interpublic Group, in part because the companies share a major client in General Motors. Also, IPG, as the No. 4 ad holding company with $7.1 billion in revenue last year, is substantially smaller than the likes of WPP, Omnicom and Publicis and therefore vulnerable to a takeover.
    Our pick for a nice boyfriend: Two options here. 1) Dentsu. With geographical strength in regions where IPG is weak (Asia, particularly) and vice versa (IPG's American business is huge), the two agencies combined would make a group to rival Omnicom in size and strength. 2) Omnicom. The Dentsu scenario is tempting, but it might hit the same bump that ultimately derailed PubliComnicis Group(e): the inability to decide who, ultimately, should drive the bus. Omnicom could just write IPG a check and suggest a few nice vacation spots to Michael Roth.

Andrew McMains contributed to this report.