By: Jennifer Saba
The economy is starting to heat up ? and as a result, money is beginning to burn a hole in the pockets of some investors.
It’s great news if you’re a newspaper owner mulling over the prospects of selling. John Cribb, principle broker at Cribb & Associates in Bozeman, Mont., says that the value of mid-sized papers is roughly 12 to 14 times operating profit (or EBITA). And those multiples have been holding steady even during the past three years, something that didn’t occur in other recessions. “Transactions slowed in 2001 and 2002,” he explains, “because there was a perception that prices had tanked. But the reality is, prices didn’t go down.” Even though the multiples held, however, operating profit dropped.
In fact, newspapers have always appealed to buyers even during the last slump. “The interest never waned,” says Cribb. “The biggest problem we have is that we can’t find daily newspapers to buy.” He expects that one of the papers his firm represents, which is about to go on the block, will fetch 10 to 12 offers? a paper with a circ of about 17,000.
Gregg Knowles, owner of Knowles Media Brokerage Services in Bakersfield, Calif., notes that same problem. “There’s a dearth of sellers,” he says about the California market where he mainly conducts his business. “There’s a great demand for properties, there’s no lack of buyers. ”
Part of the reason for a scarcity of “for sale” signs is a confluence of factors: personal reasons (some owners are still in their prime) and tax reasons. But Knowles still expects to see some action: “I’ve gotten some good indications that things will be much busier than in the past six months.”
A lack of dailies means many investors are starting to sniff out weeklies. “If you are a newspaper company and you want to grow but you can’t wait for a daily, weeklies are a very logical property to turn to,” Cribb suggests. Multiples for weeklies tend to be lower.
Even the past six months registered movement. “There’s more activity now than there was 12 months ago,” says Owen Van Essen, president of Dirks, Van Essen & Murray in Santa Fe, N.M. “There’s a chance a billion dollars of transactions will be announced between July 1 and the end of the year.”
Another sign that the times are changing: The roster of potential buyers includes not only newspaper owners, but venture capitalists and private equity firms looking to get into newspapers. “They see many attractive features about newspapers. They’re very stable and perform very well through tough times,” says Van Essen.
If the venture capitalists are curious, something’s cooking. “They’re back with a vengeance,” Cribbs says. “It’s just another sign that this industry is perceived as being on solid ground with a good future.”