Price not only Factor to Consider in Sale

Sellers of publishing companies generally want to receive the highest price possible for their property. Purchasers obviously don’t want to pay any more than necessary.

Buyers occasionally will pay a premium for the business if they feel they can reduce costs and/or raise advertising rates and significantly improve the bottom line. Thus, the buyer can probably justify paying more.

A prudent buyer will study the market and market potential and develop a feel for the operation of the newspaper under different management.

Many buyers are paranoid about paying more than the business is worth. They probably should back off unless they are strong business operators.

Several years ago Harold Geneen, former CEO of I.T.T., was such a top manager that he frequently paid 10% to 15% more than the next high bidder. He completed over 350 business transactions during his career managing I.T.T. He averaged 15% increase in net sales for his portfolio companies each year.

The message here is that a purchaser shouldn’t overpay for a newspaper business unless he can reduce costs and/or increase advertising rates.

Many buyers are simply eager to own a community newspaper. They should always plan to spend enough time up front during due diligence in order to determine what they can do after the deal closes to improve the business.

From a seller’s perspective it’s important to remember that the highest price does not necessarily mean it is the best price. Several factors besides price are important.

Factors the seller should consider include “stock” or “asset” sale, limited reps and warranties, quickness of closing, an all cash transaction and whether or not the remaining management receives an equity position in the buyer’s company.

Is the transaction too expensive? There is not a right or wrong answer.