Positioning Your Company For a Merger or Acquisition

By Steve Klinger

Almost every independent newspaper owner goes through many turns in the road, once he or she begins contemplating the sale of a property, that may have been in the family for many years and likely has become a significant voice in the community it serves and a deep source of pride to its owner(s).

Even if the owner makes a firm decision that a sale is the best course to follow, major concerns quickly take shape: Can I keep my plans confidential from employees, from the community, from competitors? What is my newspaper worth? How do I find a qualified buyer who will operate my newspaper responsibly? What are the financial considerations of different deal structures? Perhaps most importantly, how do I get from here to there successfully without consuming all of my valuable time?

Hire a Professional

Yes, you can try to do it yourself. But are the toll on you personally and the added risks really worth taking? A full-time, full-service newspaper broker offers clear-cut advantages, not only for financial reasons but to minimize the time and energy demands on an owner whose expertise lies elsewhere and whose schedule is already over-booked. For the single-digit commission percentage most full-service brokers charge a fee that is paid only upon successful completion of the transaction, the rewards far outweigh the costs. Included in those services is a professional assessment of your newspaper operation and its likely market value, how to prepare your property for a sale and who the most likely buyers are. A reputable broker prepares an offering memorandum based on a profile of your newspaper, supported by materials ownership provides, including financial information, sample copies, rate cards, equipment lists, employee information and marketing/demographic materials.

But a broker’s work does not end with the procurement of a buyer. Perhaps the most critical stage in a newspaper sale comes after a buyer has been identified, when a broker must use all of his experience and negotiating expertise: to keep buyer and seller at arms’s length, to work around potential obstacles such as deal-structuring or personality conflicts, to review documents and assist with due diligence as a third set of eyes, to provide expert advice or creative solutions to an impasse.

Not only can a good broker market the property to obtain top dollar and minimize disruption of operations, his service as an intermediary can help inexperienced sellers avoid the pitfalls of today’s often complex transactions and even prevent a promising deal from derailing over a misunderstanding or a clash of personalities.

How to Choose a Broker

Owners can make an educated decision on selecting a broker by asking a number of questions and even observing how the brokerage firm functions in its interactions with prospective clients. A broker who is not readily available by phone or does not return calls promptly may be equally elusive to prospective buyers. Sloppy correspondence or failure to send helpful, professionally prepared materials can indicate a lack of organization or commitment. So can absence of a clear marketing procedure or conveyance of lukewarm interest in handling the listing.

Owners should begin by questioning a broker on how the firm works and what the process involves. Who will be handling the listing? Is there an associate in the region where the property will be for sale or will someone several thousand miles away be dealing with an unfamiliar market? Has the broker or the firm handled deals similar in size and type, and with what results? It is appropriate to ask for a company brochure, references and a list of recent transactions.

How will the broker handle confidentiality? Does the firm use confidentiality agreements and what do they specify? What information will be needed to determine marketability and value of the newspaper, and what kind of financial statements will the broker require? Does the broker furnish a list of prospects for seller’s approval prior to contact?

Is a sample engagement agreement/listing agreement available for inspection? How long is its term and is it exclusive? What services are included and what kind of advertising will the broker provide? Is the total consideration on which commission will be due clearly defined? Are there any up-front or other fees? What will be done about buyers previously in contact with the owners, or buyers the owners do not wish to have contacted?

Reputable media brokers usually advertise regularly in trade publications, and their credits can be found in published lists of year-end transactions. A caveat: general business brokers and real estate professionals may have expertise in their fields but very likely do not have knowledge or experience of the complex workings and market forces involved in the sale of newspaper properties.

Even when questioning a purported newspaper broker, it is appropriate to ask if the firm does this full-time. Part-timers or consultants who do an occasional sale are not as likely to be fully involved in the dynamics of the market.

Finally, ask whether the broker has a publishing background. On the small-to-medium size deals most independent or family-owned papers require a publisher who understands the workings of such operations. Having a broker with newspaper operations’ experience can prove to be extremely valuable throughout the sale process.

Steve Klinger is West/Southwest Regional Director for the media brokerage firm of Grimes, McGovern & Associates. He is the former owner and publisher of the Las Cruces (NM) Bulletin. He can be reached at (505) 524-0122 or [email protected]

Grimes, McGovern & Associates provides expert advice during all phases of a transaction. Contact us today for a confidential consultation: John McGovern, CEO, [email protected], (212) 255-9700.