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Mar 28, 2003
Blog Post

M&A Notes: How to Establish Newsletter Valuations

SUMMARY: No summary available.
It's M&A time! I'm considering buying an ad-based email newsletter from one publisher, and a friend of mine is considering buying a print subscription newsletter from another publisher.

Both of us have been trying to determine fair valuations this week. In general (and this is so broad a statement as to be taken with a giant grain of salt), an actively published newsletter in this economy is worth about 1.5x annual revenues.

Factors that can lower this value:

- If the publication is on hiatus or only rarely published, thensubscribers/advertisers are less likely to be intensely loyal
or to spend money on it in future.
- If there were any peaks on the income chart in the last year that will not be repeated easily, such as a one-time deal for something or other
- If lots of buyers have already paid the current publisher in advance for services that you'll have to provide.
- If buyers have been contractually locked into specific pricing schemes that are lower than you'd like.
- If you'll have to pay any sales reps or affiliates commissions on income that's not been realized yet (such as renewals, or scheduled ads)
- If sales were based on tactics that your privacy policy does not allow (such as renting lists, promo broadcasts, etc.)
- If the current publisher wants to split off any ancillary products such as reports, teleseminars or events and continue publishing them. Many newsletter's profits are based on
- The letter itself is a loss leader or break-even without them.
- If the current publisher intends to stay in the field and could launch a competing product at any time.
- If renewal rates are on a downward trend.

Factors that can increase the value:

- If buyers are intensely loyal fans. High renewals, high open and click rates, high ancillary product sales
- If the product is highly profitable (more than 20% EBITDA profits per year) and does not require significant additional investment
- If editorial is easy to hire for so if you lose your writer he/she is replaceable with a minimum of effort (harder than you think)
- If the product has a site with high traffic for its niche
- If the product has pre-existing marketing partnerships such as co-registration deals and strong selling affiliates
- If you're in a highly competitive-niche and this acquisition could make a real difference to helping you be #1
- If you have complimentary publications already and this would fit nicely as a sibling and allow for cross-sells.

One last tidbit:
If you are buying to merge a competitor's publication in with your own file, you may base part of the price on a per-name basis. In that case you'll want to know how much overlap there is between the two files before you make a firm financial offer.

If you happen to be a member of the Newsletter & Electronic Publishers Assn (NEPA: they will compare the two files for you at no charge in a secure place where nobody who shouldn't can see the names on either side.

(Note: Aside from being a member, I have no connection with NEPA.)
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