Most independent media owners would like to be able to sell their media business at some point in the future. But how should they shape their business to maximise value? And what are the pitfalls in the process of finding a buyer and negotiating a deal?
At Making Publishing Pay we ran an extended panel discussion on this very topic, including several media entrepreneurs who had sold businesses, and been involved in buying media businesses at corporates.
Piers Bearne, a serial entrepreneur who has founded and sold three media businesses, and now offers scale up and exit services via Collingwood Advisory, chaired the panel.
Panellists included Julian Turner, who founded, grew and then sold Electric Word plc, Alex Martinez, co-Founder of Procurement Leaders, sold in 2019 to World 50, and Daniel Pitchford, co-Founder of AI Business, sold to Euromoney. And I joined to contribute my experience as a former corporate buyer at EMAP.
What’s the right time to sell?
Sometimes the right buyer appears quickly – for example AI Business was only 18 months old when it was sold out to Euromoney.
In other situations, you may want to wait until your plans have come to fruition or the market conditions are optimal. Be patient, as you may not be able to dictate the timing, but may have to seize an opportunity.
How should you optimise your business for sale?
Julian advised drafting what you want the Information Memorandum (IM) to say a couple of years before you want to sell. That then provides a template for moving the business in that direction.
Alex brought in a new CEO to Procurement Leaders so that he and the other founders could step back from the business.
Subscription based businesses consistently attract higher multiples than advertising-based businesses, so if you can demonstrate at least the potential for subscription that is beneficial.
How do you identify buyers?
Buyers need a strong strategic rationale – an acquisition is a way to enter a new market sector or geography, or to acquire skills in a different business model, or credibility/authority in a market that takes years to build.
It’s worth keeping in mind a list of likely buyers years in advance of the date you want to sell.
How do buyers think?
Corporate buyers may have a corporate development person who will negotiate the deal and pitch for money to the Board. They need a simply explained strategic rationale, a clean business with no unusual activity, and a strong credible business plan.
Personal trust between the corporate contact and the owner is important here – corporate buyers hate last minute surprises.
What can go wrong?
Owner managers often get cold feet if they feel that they don’t like the direction the buyer is taking their business in. A decision to close a deal is often as much about legacy as cash.
Again personal relationships are crucial here: Julian once saved a deal that was wobbling with a last minute dinner with the owner and his partner.
Integration and earn out
Some buyers like to keep new acquisitions ring fenced (especially if the owner is on an earn out). Others prefer to integrate immediately (eg Informa). A seller needs to decide whether they want to stay with the business or make a clean break and make this clear from the start.
What was clear was that planning to sell a media business is a long term project. Developing a good idea of who your likely buyers might be, and how you can add value to your brands and audiences will improve your chances of success.
This article first appeared on Speciall Media; Carolyn Morgan’s digital strategy consultancy for media businesses. See more here.