Where Have You Been 2010?

Thursday, January 14th, 2010 at 9:19 pm

As noted in the 2009 Digital Media M&A Report, the year is getting started with a head of steam. Valuations are creeping and M&A activity increased substantially in the second half of 2009. More importantly, Peachtree is about to close its first transaction for 2010.

(Digital Media Report: http://www.peachtreemediaadvisors.com/?p=research and
Greentech Report: http://www.peachtreegreenadvisors.com/?p=research)

This should be a big year for M&A, with a continuation of housecleaning as well as some strategic pickups. Expect Google to continue making small acquisitions (I consider a $50 to $200 million acquisition small to them). Also expect many more strategic acquisitions of partnerships. Most CEOs know that they have to grow through acquisition, but are not ready to pull the trigger on acquisitions that are not core to their newly calibrated digital media strategies. Smaller and profitable partners will be in high demand as acquisition targets due to their familiarity with boards.

As a smaller company CEO that survived the year, my advice is to clearly entertain these overtures. Keep the conversation at a high “strategy” or working relationship level. Let them know that you are committed to growing your business and getting after your plan.

By the beginning of the third quarter of 2010, when larger companies are looking at how they are going to finish out the year, that’s when the serious overture will begin. At that point, you’ll clearly need a smart M&A advisor to help you maintain this relationship while running a confidential sale process to secure additional bids for your company. Even though it is a friendly acquirer, it is always better to have more than one bid just to keep the buyer group honest.

We’re off to a great start in 2010 and look forward to hearing from you!

Posted in Digital Media, Investment Banking, M&A, Peachtree | Leave a Comment »

Investment Bank is Hiring MDs, VPs, Associates and Analysts

Thursday, April 9th, 2009 at 6:18 pm

Peachtree Media Advisors, Inc. is hiring senior bankers and support staff to help with increasing deal flow. Although the market has not turned yet, there are signs of light and new opportunities to work with growing digital media companies in the areas of strategic partnerships, alliances and business development. I’ve heard too many stories of financial talent applying for non-paying tips only waiter and bartender jobs. The job market is terrible and the opportunity exists to work with me in getting after emerging opportunities in digital media, technology and green technology – the new wild west.

If you are smart and willing to have your compensation grow with the firm’s growth, then look at the job descriptions below.

Link to Job Description for Analyst and Associates: http://www.peachtreemediaadvisors.com/Job/AnalystAssociate2009.pdf

Link to Job Description for Managing Directors and Vice Presidents: http://www.peachtreemediaadvisors.com/Job/ManagingDirectorVP2009.pdf

Send cover letter and resume to: resumes@peachtreemediaadvisors.com

Please keep in mind that this is not a Business Week advertising, conference sponsoring, Lincoln Towncar driving, first-class flying, shoes shined and manicures at your desk while you wait for a deal to come in over the transit investment bank. MDs and VPs are expected to pound the proverbial conference pavement, meet with CEOs, make phone calls, build relationships, creat blog posts, write articles, help with research and most importantly, close transactions. Analysts & Associates are expected to do everything (and for much less money).

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Lower Your Costs – Stay in the Game

Wednesday, April 1st, 2009 at 7:11 pm

I just had lunch the other day at the new Spice in New York City for $15 all in ($20 with tip) for two people. This is an excellent deal for NYC entrepreneurs trying to dine without the wine. Places like this allow you to meet face-to-face in a central location (Union Square) as well as keep costs down while you are chasing down new business. The restaurant is near Union Square and the address is 39 E 13th St, New York 10003 (At University Pl).

This quick post is also a precursor to my next post coming on Monday, which is a post encouraging digital media companies to develop strategic partnerships in order to maintain and grow in 2009. Similar to foreclosures, having your competitor go under is NOT good for your business when it comes to raising capital or attracting strategic buyers. More to come on this topic by next Monday.

Posted in Digital Media, Investment Banking, Venture Capital | Leave a Comment »

New Media Investment Banking

Monday, March 23rd, 2009 at 8:31 pm

green-logo1 The new media investment banking landscape has changed to favor smaller firms and boutique investment banks. The old model of investment banking, which requires a heavy staff of partners, managing directors, vice presidents, directors, associates, analysts, research departments, Fed Ex staff, assistants, graphics design department for presentations and a line of Lincoln Towncars to take each banker down the block does not work the digital media landscape today. The majority of these interactive companies need specialized investment banking services not provided by the bulge bracked investment banks, such as capital raise, strategic partnership, business development, and sell side merger and acquisition advisory services. Digital media companies today need an investment banker that can help them structure deals with potential strategic partners as well as raise them capital and keep them abreast of the evolving M&A market.

Boutique investment banks like Peachtree Media Advisors, Inc. offer an array of these services that help entrepreneurs grow their business in a fast changing and increasingly competitive market. There are other digital media investment banking firms that offer similar services and have closed more transactions, but Peachtree Media Advisors is the only one that focuses solely on digital media. In addition, “my firm” only staffs up when projects come in. Lean and mean. (www.PeachtreeMediaAdvisors.com) by the way.

In this economy it is easier to staff up when a project comes in. There is a substantial amount of financial talent out there looking to take on project work on a contract basis. It seems illogical from a business perspective to keep a large support staff on payroll. (Kind of like a movie director keeping the cast and crew on payroll until the next movie.) This is just one man’s opinion, but the boutique digital media investment banking model can be and should be as nimble as the companies they are representing.

As for the bulge bracket investment banks, those days of a 20 person deal team on a $100 million transaction need to be over. Really? I mean $50K monthly retainers are ridiculous. And more importantly, why would you want to take merger and acquisition advice from an investment banking group that is competing internally with derivatives and mortgage-backed securities traders. Bulge bracket investment banks are triple-dipping…taking TARP money, insurance money from AIG for those same assets and are now about to re-purchase these bad assets backed by government money. Wow. Huzpah.

My point is that Managing Directors at bulge brackets charge high fees just to send out a press release that a company is for sale. I believe that the value add of bulge bracket firms in a complex and rapidly changing interactive environment is limited on account that most digital media companies do not need many of the investment banking products that they offer – debt raising and collateralized debt obligation structuring…few of these companies have large enough cash flow to raise a debenture round. In addition, the IPO market has all but dried up. When is the last time you saw a small digital media company “need” a research analyst following them? (Remember the days when managing directors used to whoo companies with their all-star analyst…some guy who ran a few Factset models and was now an industry expert.”) These days digital media is a ground floor pounding the pavement hitting conferences environment. Lincoln Towncars and research analysts are so 90s!

My advice, check out the boutiques. You’ll get better advice and it will save you a ton of money. Most importantly, invite Peachtree Media Advisors, Inc. to your pitch.

Posted in Digital Media, Investment Banking, M&A, Peachtree, Venture Capital | Leave a Comment »

Raising Venture Capital – "Do It Yourself" Links

Tuesday, March 17th, 2009 at 8:33 pm

Just like anything, venture capital can be raised by doing it yourself or hiring an investment banker to assist you. Hiring an investment banker is expensive, so you may want to explore raising the money on your own. Should you decide to raise the money on your own, here are a few Web sites that you should know about to help you reach venture capitalists.

1) www.Boogar.com (Angels and VCs);

2) www.TechCrunch.com (Tech blog – go to CrunchBase section); and

3) www.TradeVibes.com (Start Up community – look for companies similar to yours and who financed them. Then reach out to competitors of that venture capital firm or VC’s with similar investment profiles).

Prior to reaching out to investors, you should have a one to two-page executive summary as well as a short detailed business plan or management presentation. When describing your business it is important to focus on the end user and why they need your product.

Answering these three questions honestly will give you solid footing when you enter a conversation with a VC: 1) What is your product helping the end user accomplish?; 2) How many of your end users exist (market size)?; and 3) What is the health or buying power of those end users (market trends)? If your end users are mortgage brokers, auto dealers or newspaper printing presses, then you will have an uphill battle. If your end users are digital imaging companies for medical records or lithium battery manufacturers for hybrid cars, you should see a more positive response.

It goes without saying that a profitable company with growing revenue will find it much easier to raise money than a company that is raising start up capital. Most investors prefer to invest in companies that are expanding into new markets or need capital to fulfill new orders. Start up capital is easier to raise (from institutions) when someone is a former executive from a large company in the field of the start up.

And one more thing, investors like smart and passionate, but not creepy. It is kind of like dating, take the “we’re just friends” hint and move on. But make sure they get the press release after the raise is finished!

Excellent Business Week Article:

http://www.businessweek.com/magazine/content/09_22/b4133044585602.htm

Posted in Investment Banking, Venture Capital | Leave a Comment »

What is the value of my company?

Tuesday, March 17th, 2009 at 2:10 pm

The most common question that I get from entrepreneurs is “what is the value of my company?” The answer to that question is simply what someone is willing to pay for your company at a single point in time. That said, the primary variables to valuing a digital media company are the growth rate, competitive landscape (market metrics/trends) and the strategic buyer group.

Just like any asset, a digital media company’s value is derived from the anticipated cash that can be derived from owning that particular asset as well as the condition and prices of similar assets in the market. Today, the value of most digital media companies is not derived from following the traditional corporate finance practice of discounting the projected cash flows at a representative discount rate. Future cash flows are difficult to predict and one buyer is going to have a completely different opinion on how to make monetize an asset from another buyer.

Comparable private company transaction values and the valuation multiples of publicly traded companies (“comps”) are a good way to ascertain a valuation range. Unfortunately, these are only tools that can provide a business owner with a range, which are typically based on multiples of Revenue and EBITDA. These metrics fall short in pinpointing the actual value at which a transaction should take place.

Three of the most common statements that I get from clients that are not factors related to valuation are the following: 1) Company XYZ received $30 million and my site is better than theirs; 2) All the buyer has to do is add advertising and invest a little bit of money in marketing, then we will be an $X million company based on those revenue multiples (that’s like me saying all I have to do is lose some weight and take acting classes and then I’ll be the next Denzel Washington)…forecasting is taken into account in M&A, but buyers typically do not want to pay for what they are bringing to the table; and 3) the most common statement is “I believe my company’s value is $X million,” which is an arbitrary number that is based on external factors that have nothing to do with the business, such as this is what I want for the number of years that were put into the company, this is how much money I want at this point in my life or I can live comfortably off of this amount for however many years. Who knows the exact psychological rationale, but many of the reasons for seller value have little to do with the asset (at first).

So, instead of asking “what is the value of my company” an entrepreneur should be asking themselves “how and when do I achieve maximum value for my company?” The best way to maximize value is to hire an investment banker that focuses on your sector and selling to the company that needs your company the most at the time when they are motivated buyers. Although an entrepreneur can run the process themselves, and many are successful at doing so, oftentimes hiring an advisor is money well spent. Not only is it a piece of mind, but it saves the business owner a great deal of time that can and should be spent on running their business.

Similar to getting a second opinion from a doctor, the entrepreneur should get the opinions of multiple bankers. This will help the entrepreneur get a better feel for where her company is valued or its potential value. In choosing a banker, the business owner should choose the banker that they feel most comfortable with, understands her business, and knows who the potential strategic buyers are and why they would want to own her company.

As a banker, I clearly believe that the sell process generates the highest possible valuation and best deal structure for clients in the right environment. Entrepreneurs that believe they will be looking to sell in the next year or two should begin speaking with advisors now. Deal-making in the coming months is going to be done with surgical precision, meaning there will be few wide nets cast by buyers, but simple lines cast for very specific targets that complement current operations. Having an advisor that understands your business completely will serve you well in the marketing process.

Posted in Digital Media, Investment Banking, M&A | Leave a Comment »