What are the latest trends and developments that buyers look for in the media industry? A recent survey published by Collingwood, which interviewed a panel of media buyers, identified key characteristics that could make your media business more valuable and increase the likelihood of a successful transaction.
Despite a slow down in the volume of transactions, Media valuations have held up well over the last 12 months. In particular, assets that are able to display strong recurring revenues, resilience, revenue diversification, scalable operating models and high quality of earnings.
In addition, the acceleration in audience and sponsor appetite for live events has underpinned strong, and in some recent cases, market-leading valuations.
Whilst there are high levels of competition for quality assets, those that are perceived to be number two or three in their markets have struggled to transact. A common theme among respondents was a ‘flight to quality’, meaning they are chasing only the best businesses which hold the number one position in their markets, and overall a higher bar for transaction approval.
What are the drivers of value?
There are common themes, and value levers a business owner can pull to maximise on value and drive a competitive sale process. As covered in the Media Acquisition Report, it was noted that the buyers interviewed shared a common view around five areas they believe drive value.
Recessionary resilience – Due diligence programmes are increasingly concentrating on recession-proof business plans, but also end markets. Buyers are modelling prior recessions or economic downturns to assess how robust or high risk a business might be. This extends to the markets the business serves as well as its own underlying performance and volatility in trading periods.
Quality of earnings – Revenue retention is a predictor of growth but also the quality of a business’ products, processes, and people. The benchmark buyers are keen to see is 100%+, along with other key performance indicators (KPIs): strong and growing average order values, and high and increasing productivity which will ultimately impact gross and net margins.
Market leadership and growth – The size and value of your market is an important factor for buyers when identifying growth opportunities and their ROI. For trade or strategic buyers a primary driver is typically around growing their market share and share of wallet (revenue taken from customers compared to where else customers spend money in the same category).
Strong commercial KPIs – Beyond financial metrics, audience behaviours are increasingly important. Firstly, understand engagement and then seek to improve it as well as retention, and monetisation. Businesses that are able to retain audiences typically display the characteristics of quality products and services.
Strength of management – A strong team outside of the Founder/owner is considered important by many interviewed buyers. Key person risk, where strategic decisions and important relationships are held by one or few team members is cited as a common and major concern in smaller businesses. Having a management team in place and teams working autonomously, supported by clear decision making frameworks and accountabilities is what buyers want to see.
What does this mean for a business owner?
What areas should you prioritise as you strive to scale your business whilst ensuring you’re creating value in the process?
Put quality of earnings front of mind
- Target revenue and volume retention rates over 100% and 80%, and revenue per head over £200k
- Develop a key account strategy to improve renewal rates, and increase average order value
- Leverage insights on audience behaviours to deliver more targeted client propositions
Build a growth plan that cements your position as number one
- Focus on winning market share, and identifying growth opportunities in current or adjacent markets
- Develop strong products that position you as number one in your niche
- Undertake in-depth audience and client research to feed product development and commercialisation
Build a fit for purpose governance and reporting process
- Improve governance and decision making, adopting structured meeting rhythm
- Align KPIs to develop a strong performance culture to deliver maximum exit value
- Develop a bottom up growth plan rooted in reality that you can evidence through track record and forward looking trends
Interested to learn more about buyer behaviours and the metrics that matter?
Whether you’re looking to sell a business or not, the Media Acquisition Report provides actionable insights that can help inform your decision-making process. It serves as an important tool for those interested in understanding the current market conditions and trends and enables readers to anticipate future changes in their business model.
Find out how you can best create value within your own organisation by prioritising investment in areas valued by buyers. Build confidence among stakeholders in your long-term strategy while helping identify potential opportunities that should be explored further.
Download Collingwood Advisory’s report here: Media Acquisition Report: M&A Outlook 2024-26 – European version
Daniel Pitchford
CEO, Collingwood Advisory
Collingwood works with media entrepreneurs to create value. Our highly experienced team has centuries of experience in publishing, events, and subscriptions, with backgrounds in leadership, strategy, M&A, marketing, sales, and product development. We provide scaleup, business strategy, and corporate finance advice. Collingwood is part of Mx3’s Collectif – if you are interested in joining, in the first instance contact Jez Walters at jez@mediamakersmeet.com.
