Deal or No Deal?

Despite economic concerns highlighted by a slowdown in the housing market, merger and acquisition activity in the media and information industry remained steady through the first three quarters of 2006. Book publishers in the directory, reference, educational, professional and consumer books sectors have been especially busy, according to M&A firm The Jordan Edmiston Group Inc. (JEGI), recording 30 transactions through September of this year.

For publishers looking to acquire other companies or positions themselves to be bought out, Book Business sought advice from several M&A advisers on maximizing the value of your next transaction.

Tips for Sellers
“There are several factors that drive value, the most prominent of which are proprietary content, prestigious authors and a strong backlist. Also important are solid distribution networks, a presence in international markets, and digital content, as either an alternative format or a supplement to print content.
Other factors that weigh heavily in a potential buyer’s evaluation of a business:
1. Inventories. Keep inventory current and dispose of stale inventory.
2. Receivables. Collect aged receivables and write off uncollectible accounts. Deadbeat customers are a red flag to buyers.
3. Tighten up your backlist. Eliminate money-losers. Valuations are typically based on a multiple of profit, so low-margin and unprofitable titles depress enterprise value.
4. Cut expenses first. [It’s] better to operate lean than to try to convince a buyer of potential cost-savings.
5. Critical to a successful transaction is a reputable, experienced M&A adviser. Selling a business happens once or twice in a lifetime for owners, but investment banks do it many times a year. A good advisor can find the buyer for whom the business offers the best strategic fit and therefore may be willing to pay the highest price.
6. A good M&A adviser also can help negotiate the nonfinancial terms that can be important to the seller: disposition of employees post-sale, an ongoing role in the business, noncompetes, earn-outs—all of these are considerations that can impact the seller.
7. Finally, timing of a sale can affect value. Right now, valuations are at historic highs, and M&A activity is robust—a climate that is likely to persist over the next 12 months. While quality companies will always attract a buyer, the cyclical nature of the M&A market suggests that such a favorable M&A environment will not last forever.”
—Joe Berkery, president, Berkery, Noyes & Co.