Deal or No Deal?
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.
Matt Steinmetz is the publisher and brand director of Publishing Executive.