Cribb, Greene
The market for newspapers and other publications is gaining some momentum as we move further into 2011, but is still unsettled. Several of the smaller newspaper bankruptcy sales have moved or are moving through the process with values under 4x trailing EBITDA.
However, there are private sales of good quality properties that are bringing stronger values. A group with operations in several states has been valued by the market at over 5x EBITDA, and current discussions on several other quality properties are over 5x and in one case is far above this multiple range. Conventional bank loans are still difficult to obtain, and lending is in the 1.5x to 3x EBITDA range forcing buyers to provide a significant portion of equity in these transactions. A number of strong, family-owned groups are electing to avoid bank-financing altogether and are using company cash for acquisitions.
Seller financing continues to be an excellent tool in transactions where there is not significant bank debt already in place. The selling values of seller financed properties can be a full multiple, or more, higher than cash sales.
For mid and small market newspapers it seems that the panic surrounding the newspaper industry and the popular thought that the industry is in it’s death throws is starting to dissipate. Mid and small market newspapers suffered severely in the recession (as did nearly every other business), but most are recovering. Some of the concern about digital competition is backing off as well – still a major issue but there seems to be understanding that local newspapers continue to be well-positioned businesses into the future. In every case that a new media has been introduced as a newspaper competitor in the market (radio, broadcast TV, cable TV), the end result has been that newspapers take a smaller piece of a larger media pie. It appears it may be the same with digital competition.
However large market newspapers continue to do poorly, with most having had a down first quarter in 2011 after having some modest encouragement in the fourth quarter of 2010. Also of concern is speculation from a number of media analysts that pre-print revenues may decline severely in the next few years. Pre-print revenues have held up fairly well in most newspapers, and their reduction would have a strong negative impact on profits.
Owners of mid and small publications who have been sidelined and waiting for the market to improve may want to consider selling now. Although multiples and deal flow are improving, there is little evidence that prices will ever return to the heady days of the past. It may also be a good time for buyers to target the “wish list” properties they’ve always coveted, as some of these papers may now entertain offers.
