Entertainment, Media & Publishing

The business models for this sector are quickly changing, and we have successfully assisted many clients who have hoped to cash in on their success before the model upon which it was built changed too drastically. Attracting and retaining customers can be the most difficult problem companies face, whether the media is subscription-based, advertising supported, interactive, or a combination of all three. Companies that have a palpable brand and a demonstrable retention rate tend to fare very well.

Exit planning in this sector has focused on helping clients measure profitability and find ways to enhance it by focusing on specific core competencies. Competitive advantages in this arena are won and lost overnight, as users shift their viewing patterns. Companies that have a demonstrated ability to deliver content across media spaces, all while maximizing profitability, have been handsome acquisition candidates.

Companies in this sector ranging from traditional newspaper publishers to purely online portals are becoming increasingly focused on finding advertising revenue. Companies that are adept at providing tailored advertising content have been presented with many attractive offers, while traditional newspapers and other print magazines have struggled to remain profitable.

Recent M&A Trends

The lower middle-market (deals under $100 million) has weathered the credit freeze and "Great Recession" better than the upper middle market has. The deal landscape for the middle market has changed as Wall Street has struggled, but so far, deals are getting done.

The biggest change has been in the deals has been valuations, reliance on debt and reliance on the seller to finance part of the deal. We have seen an increased use of earn-outs, which are typically used in periods where interest rates are high or credit is tight. Thus, PE groups have not stopped investing, and in fact are aggressively trying to deploy their capital into middle-market companies.

As profits are returning, many strategic buyers are more willing to use their cash reserves to purchase various technologies or intangibles that are of synergistic value to them.

Depending on your situation, now could be a good time to seek an exit or even plan for an exit several years down the road. For those that want top dollar for their company and know it will achieve strong, consistent growth for many years, now is definitely not the right time to sell. While valuations may be down, there are many creative ways of structuring deals that may not affect your end proceeds much.

Therefore, if you are a business owner looking to sell, do not avoid doing so due to market conditions. While current market conditions might require a more nuanced approach, the directors at Orion Capital Group have the experience to help you weather these current changes.

If you would like to learn more about Orion Capital Group, please contact us by your prefered means. Any mode of communication is held strictly confidential.

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