The headlines tell part of the story… As Whitestone Sees Strong Third Quarter, appearing in the Oct. 12 issue of Hotline, and Newsletter M&A Deals Increase In First Half, in the July 19 issue.
But what of the other side the story? Does this increase in M&A activity signal an increase in specialized-information publishers’ valuations?
It may be too early to tell, or at least to put a hard number to any valuation change, but some financial mavens believe the value of such properties ahs increased over the past year.
Whitestone Communications, Inc. reported 23 deals for the first three quarters of this year valued at $332 million, compared with 12 deals in the same period a year ago valued at $36 million.
Several of the bigger acquisitions of the past year may look like the traditional publisher-to-publisher deals, but really represent more of the private equity firm investment, as the money behind the acquisition comes from the equity firm backing the buyer. Private-equity financing was behind the formation of the Vendome Group and its acquisition of the real estate titles of Brownstone Publishers, Inc., the management buyout of Phillips Health, LLC, and the sale of Thompson Publishing Group, three of the larger deals in recent months.
Whitestone President Baran Rosen said buyers have gained confidence in specialized-information publishing, increasing the competition for acquisitions. But he noted that those publishers still suffering from the economic effects of the past years’ recession shouldn’t expect that their companies’ values are higher simply because M&A activity is increasing. The books still must represent healthy business trends, he said.
Rosen noted that it’s relatively easy to look at a deal once it is completed and figure out the multiples on overall revenues. But remember that the deal was probably put together on the basis of some multiple of cash flows he said.
Rosen added that some of the bigger private-equity deals done this year have originated with equity companies that are backed by family-financed funds, which have lower hurdle rates for deals than equity firms backed by institutional funds.
The Whitestone president also sounded a note of caution about the third-quarter increase he reported. While newsletter deals were ahead of the third quarter 2003, M&A deals throughout the publishing industry were down year-to-year in the quarter. “I wonder what it would have been like for newsletters without the Phillips deals?” he mused.
This article is reprinted with permission from Hotline. Copyright November 8, 2004.
This article was reprinted with permission
from The Business Publisher.
Copyright May 31, 2003 www.newsletters.org
