Venture Planning Associates.
Used by permission.
under-performing newspaper publishing company in a growing and under-served
market. The property must have significant cash trailing cash flow, and be
available at a discount on current market values.
property is located in South Central Washington State (Yakima Valley) and serves
a diverse population in excess of 400,000. Harry Dent in his future growth
book, "The Roaring 2000's", identifies this region as a pre-boom area destined
to grow significantly over the next 15 years.
The current company to
be acquired publishes a variety of local and regional papers, a series of
Spanish language papers (population is 30% Hispanic), travel guides, wine guides
and other specialty publications. There is no large competitor, nor is one
likely because of the company's current dominant position in the region.
The Company: The target acquisition
is a 35 year old company and is for sale by the founder and current publisher.
The current owner wants to slow down due to health problems, but is willing to
stay as a commissioned sales person and consultant for a minimum of two years to
provide a smooth transition for the new owners. Current staff is all long term
and will stay on after the transition.
Current Financial Condition:
Company is to be acquired is debt free, has annual sales of $750,000 per year,
and is growing 10-12% per year. Taxable income has been in the $50-80,000
range. Seller's discretionary cash flow for 1997 and 1998 (projected) is
$175,000 per year.
terms and conditions have been negotiated to $800,000 with a $200,000 down
payment and seller take back financing of $600,000 @ 8% on a 15 year note.
Venture Funding Required:
plans to consolidate some publications and expand to the Tri-Cities Area require
a capital infusion of $500,000. The additional $300,000 will be earmarked for
expansion and consolidation expenses and working capital.
expansion of various publications will be implemented. The Yakima valley is
rapidly becoming a "Northern Napa Valley" and a wine publication is under
discussion. Special section advertising for automobiles, real estate and food
and wine sections can be added. The company also will be expanding its Legends
Casino Newsletter for the local Indian Casino business. Expansion to the
Tri-Cities offers major growth potential. The principals believe they can
double the sales in five years with only a 35% increase in overhead.
Participation and Exit Strategy:
The principals are open to a variety of financing options. A blend of common
and convertible preferred stock is proposed and will assure a reasonable return
prior to an anticipated exit strategy by sale to a large national business chain
after five years. Future valuation of $3 - 5 million could be achieved under
the current acquisition and expansion plan.
Financial Returns: Projected
financial returns for the company are well above national averages due to the
underutilized assets and low current marketing effort. The company is expected
to generate a 30% EBIT cash flow after acquisition.
The Management Team:
possible management team has been assembled to assure financial success.
President and General Manager: John
Smith has a thirty-year career in media and advertising sales and management,
event sponsorships, and retail entertainm