Company/Project / Name
City, State / Philadelphia, PA
Industry
LY Est Revenues / Media
$100MM
LY EstEBITDA
LY AdjEBITDA / $11MM
$13 MM (adding back owners excess comp, one-time restructuring, personal expenses)
Company Description /
- Amedia company that reaches 3 million readers and 5 million unique visitors, serving more than 170 towns in eastern PA.
- Products include over 100 daily and weekly newspapers (including special sections, ad notes, classifieds and inserts), online content and listings, and shoppers/direct mail, with strong coverage in key demographics.
- Company has a history of operating underperformance compared to its peers, representing an opportunity for investment and operational improvement on both revenue and costs.
Transaction Dynamics /
- Larger parent company will likely need to restructure by end 2013, when their $1.0B in LTD comes due. This would pave the way for a potential deal, as covenants preclude major acquisitions and/or divestitures.
- Current COO is open to discussions on how to execute such a carveout, and would be eager to work with/for Kamylon. New CEO candidate is a well-known serial entrepreneur in regional media and has founded and sold several newspaper companies over his career; he is well-connected in operating circles and at the highest levels of agencies and potential revenue-driving clients like Macy’s and Sony; he agrees that Companyrepresents an interesting opportunity and still lives in the area.
- Key to the transaction is the inclusion of website.com, which currently represents featured content from Company’s 150 websites. This asset could represent a gem within the portfolio, and has been undermanaged since launch. The local and national potential for expansion of website.com may be considerable in multiple formats, including lead generation, listings, and reviews.
Investment Thesis /
- Investment prospect generating over $100MM in revenue in an attractive regional market with opportunity to improve EBITDA margins and considerably expand online revenues and business model
- Could represent a compelling opportunity in this out of favor sector at a good entry price (anticipated valuation 4-5X EBITDA)
Value Creation Plan
Risks / Questions /
- Acquire company, upgrade management, develop strategic plan – this could include but is not limited to a review of operations and circulation of all newspapers (and possibly transition margin-bleeders to online-only); potential addition of one or two days of circulation to most popular weeklies for an immediate revenue boost; sell non-core properties to improve company focus and reduce net cash outlay; right-size cost structure and improve Company’s operations, margins and cash flow through implementation of best practices and metric-based culture of performance.
- Deal would need to be strategically approached; Parent has been reticent in the past at discussions, and is technically prevented by covenant entering into any type of M&A agreement even if conversations were to occur. Parent could just be willing to let Company die.
- Newspapers have been left for dead by most investors and revenues continue to shrink.
- Deepening of economic downturn could affect both local and national advertising revenues.
Next Steps /
- Determine Kamylon interest/discuss potential, continue evaluation.
Printed: 10/14/2018 4:16 PMKamylonConfidential