Dealmaker in hunt for media targets

THIS year will be the worst for advertising-driven media in Europe since the 1930s Depression, says Jeff Montgomery, managing partner of GMT Communications Partners.

This gloomy prediction from the largest private equity investment company specialising in European telecoms and media comes as various commentators have been suggesting an upturn in advertising revenues in the UK.

'Since last summer, there has been a real change of sentiment - outside of Germany, which already had bad sentiment - among people who run media businesses all over Europe,' says Montgomery. 'The US is experiencing the worst advertising recession since the 1930s; commentators are saying it is also true of Europe.'

So why is this lanky 49-year-old native of Philadelphia looking so jubilant? Because GMT is sitting on a cash pile of $365m (£230m) and has recently signed seven transactions in six European countries.

Although Britain was not among them,

GMT has been based in London since it began life as Baring Communications Equity in 1992.

Throughout the fevered boom years of the late 1990s, GMT remained robustly sceptical about the prospects of the media and telecoms sectors. Some of Montgomery's investors were clamouring for him to become more active in the market.

Although Montgomery was an enthusiast for the internet and GMT has made several successful investments in internet-related businesses, he was taken aback by some of the proposals that came across his desk. 'The founders of QXL came to us with their business plan,' he recalls with a chuckle. 'A year later they came back and it had a little more substance.

'Apax invested in it, QXL went public, was worth a couple of billion dollars at its high point, and Apax sold on its interest. I was shocked to see in a recent report that QXL's capital revenues were only $3m.'

Montgomery has been associated with the media and communications business since he sold dictionaries door-to-door for his first summer job as a teenager. He worked in Saudi Arabia for several years, where he started

what became the largest English-Arabic newspaper and ran a cable TV network. After attending Wharton, the University of Pennsylvania's business school, and working for a business-to-business publisher in New York, he became managing director of the Veronis Suhler & Associates communications investment fund in New York, investing in Europe as well as the US.

Out of the office, Montgomery's dress code is transformed from preppy to beatnik, with beret, purple jacket and fluorescent socks replacing designer business suits. He lightens up by playing bongo drums or cycling with his wife and two small children in Richmond Park.

His co-founders at Baring Communications Equity, Terrence Tehranian and Timothy Green, are still partners with him in GMT Communications, and their equity funds have made over 25 investments across 14 countries. 'The capital focused on media and communications businesses has shrunk dramatically, particularly in Europe,' Montgomery says, 'because a lot of money has been lost in the telecoms and cable TV businesses. The total available capital in the US today - that is, funds with money to invest in US media and telecoms companies - is about $30bn. In Europe, it's about $7bn.

'Of that $7bn, we've got a third of a billion.

The rest is from European funds or US funds that have allocated money for Europe.'

Montgomery does not regard the US funds as much competition, partly because of their size and partly because of their remoteness. 'They are big funds so they want to invest $50m to $100m per deal. Our maximum is $25m to $50m. Also, their investment decisions are being made in the US and invariably such decisions made a continent away are wrong.'

Montgomery expects the UK 'to produce some excellent brand name media businesses at attractive prices'. For GMT, with its $365m cash pile, this is potentially a great buying time, with the target amount for each investment somewhere between $10m and $25m. 'We would like to do 12 to 15 deals in businesses with an enterprise value of under a hundred million, and with established revenues and cashflows, over the next two years,' he says.

Yet underpinning Montgomery's confidence about his own company's opportunities is his stark and downbeat prognosis for European media. Technology got killed in the US, followed by Europe; so did telecoms and cable TV,' he says. 'Media got killed in the US, but media in Europe is just hanging in the balance.' Not for long, Montgomery believes.