“We want to buy your company.”
Sooner or later, it’s likely you will receive an unsolicited request to buy your publishing operation or one of your titles. And while the upper tier of M&A deals may be slow this year, mid- to small-market deals will still get done in abundance. So if you’re preparing to sell your company, or just part of it, it pays to know what factors add value when it’s time to put your publishing properties on the market. Here is a synopsis:
1. Show Me the Money
A history of consistently strong growth in revenues and earnings is, and always will be, the most influential consideration in calculating value. Buyers will typically look at a three-year average, with special attention given to trailing earnings.
2. Take Me to Your Leader
Publications that occupy the leading positions in the competitive marketplace command the highest prices. Buyers will look for measurable parameters such as ad page and ad dollar market share, and reader preference.
3. Size Matters
Smaller properties, even profitable ones, will tend to attract lower multiples. This is especially true of properties under $5 million.
4. Frequency Matters
Buyers favor titles that are published at least monthly.
5. The Right Stuff
Buyers tend to leave a strong management team in place. Top guns in publisher, editor, and sales roles will help attract top dollar.
6. Content is King
A superior editorial product is an essential component of value. Repurposing content is one road to increased profitability in today’s world of converging media.
7. Market Served
Publications serving growing but stable markets fetch the highest prices. But buyers are leery of flash-in-the-pan industries that show steep fluctuations from one year to the next (“hockey sticks”).
8. A Nice Fit
Deals that approach the higher end of the multiples scale will tend to be the best strategic fits. Buyers are looking to increase market presence and dominance. Acquisitions that create opportunities for cross-promotion and brand extensions are favored.
9. The Golden Trifecta
Today’s ideal acquisition candidate offers balanced but diverse revenue streams embracing print, online, and events initiatives, plus the usual ancillary profit centers. Today’s magazine reader expects to have access to a Web site or e-newsletter that offers immediate news and proprietary content. A “must read” for subscribers means “more dollars” for sellers.
10. How’s Your Circulation?
Buyers who pay a premium for a title or group of titles expect the highest standards of distribution quality, as evidenced by an outside audit. Buyers of controlled circulation titles will look critically at one-year and direct-request qualification. Paid-distribution publication buyers will examine renewal and newsstand sell-through rates.
Even popular and highly successful start-ups are at a disadvantage in the pricing game, as are newer publications—say, less than five years old.
12. One and One Equals Three
Deals that command top dollar will produce the highest adjusted cash flow to the buyer after the sale, through consolidation of expenses and economies of scale. The ideal acquisition candidate will be successful but leave plenty of room for improved efficiencies.
Keep in mind that the final purchase price of most publishing operations—especially those in the small- to mid-size realm—will fall within a fairly narrow range of multiples of earnings or percentage of gross revenues. These factors will help you determine where you stand when it’s time to sell.
Michael D. Kreiter is director at W.B. Grimes & Co., a Gaithersburg, Maryland-based investment firm for the media industry. He can be reached at email@example.com.