Tuesday, May 5, 2009

Mergers and Acquisitions: Who Buys What and What Do They Pay?

Robert HalperThis is a guest appearance on the Blog by Bob Halper who summarizes his outstanding presentation at the 2009 Cowan, Liebowitz & Latman Publishing Seminar.

Cowan Liebowitz & Latman has been one of the leading advisors to book publishers since the early 1980’s in addition to CLL’s traditional commercial and intellectual property practice.

The Firm, and especially Martin Levin and I, are actively involved in advising publishing and information services clients in a wide range of merger and acquisition transactions, in areas such as school and library publishing, science and professional publishing, trade books, juvenile books, data base businesses, newsletters, establishment of venture capital funds and many other areas of publishing, including electronic publishing. We have successfully completed more than 105 transactions over the last twenty years ranging in value from under $5 million to over $75 million. We have been able to even the playing field for small to mid-size publishers who might otherwise be overmatched when dealing with the resources of larger media companies.

We have worked in this area because I have had extensive experience handling complex commercial transactions in the publishing field, among others. Martin has an in-depth working knowledge of the publishing business, having been a successful operating executive in major publishing conglomerates for 37 years prior to becoming an attorney working on publishing mergers and acquisitions.

This special competence provides our clients with advice on how to establish or increase values, and provides the buyer or seller with entree to the decision makers in publishing and information businesses domestically and abroad. We are also able to add value to publishing transactions by bringing into play specialized tax knowledge to maximize the final benefits of a transaction, and the expertise of our Intellectual Property group, which can give advice on rights that are an essential part of a publishing transaction.

The following is a short summary to help you think about how the values and prices are established.


While it is goal of every representative to achieve the highest possible value for the sale of a business this is especially true in the sale by an independent publisher, who is usually making a once-in-a-lifetime sale of his or her largest single asset. While our current experience in representing clients at the London Book Fair in April 2009 indicated that major buyers are receptive, it is clear that prices will be lower than in previous years. Value will be determined by these factors:

Quality of the Publishing Program.
  • Cash Flow
  • Operating Profit
  • Earnings Before Interest Taxes and Depreciation
  • Revenue
  • Growth Prospects
It is also true that the selling price will vary by the segment of publishing.
  • Segment of the Market
  • Trade
  • Science, Technology and Medical
  • School Library and Academic
The following chart will demonstrate based upon experience how a price can be estimated:

Valuation Examples

TradeAcademic, School & LibraryScience & Professional
Revenue$20 mil$20 mil$20 mil
Operating Profit
as a: % of Revenue
7% - 12%15% - 20%15% - 25%
$ Amount (millions)$1.4 - $2.4$3.0 - $4.0$3.0 - $5.0
Value as a multiple of Revenue:
Multiple1x1.5x- 2.5x2.0x – 3.0x
Value (millions)$20$30 - $50$40 - $60

Thus a trade publisher meeting the quality requirements with an operating profit consistent with the ranges as shown will probably be offered in the range of one times the revenue of his company as a purchase price and following this same process an Academic, School or Library publisher will be offered from 1.5 times to 2.5 times revenue depending upon the quality standard, and finally a Science & Professional Publisher may expect offers in the 2 to 3 times the revenue.

Our experience in working with publishers, even those who are brilliant, has shown us that it takes some additional personal explanation to make sense of how the system works—and this is why we offer to those who are considering a sale, a meeting with us or a phone conversation with me at 212-790-9260 with your questions, free and without obligation.

If you would like to see some of the transactions in which we have been involved, go to our web site, www.cll.com and click on “lawyers” for Martin Levin or me.

In any event, send me your name at rxh@cll.com and I will put you on the list for the 2010 Seminar when for the 21st time we will once again be talking about who bought whom and what they paid.