Magazine article Folio: the Magazine for Magazine Management

Debt Financing, Due Diligence and Kidnapping on the P&L: Tips for International M&A

Magazine article Folio: the Magazine for Magazine Management

Debt Financing, Due Diligence and Kidnapping on the P&L: Tips for International M&A

Article excerpt

THE INTERNATIONAL M&A PROCESS is becoming increasingly homogenous but American publishers looking to buy or sell abroad still need to be prepared for some distinct differences, according to a panel of publishing deal experts at the ABM/ FIPP World Conference last month.

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The auction process that typifies many American publishing deals is an anathema abroad, particularly in Great Britain and Western Europe, according to Charlie Engros, managing partner of law firm Morgan Lewis. "There is a lingering discomfort with the American auction style of M&A," he said. "Europeans prefer to develop relationships with sellers and they want exclusivity in the early stages of the process. In an auction, European buyers feel like they aren't fairly treated and they want the chance to convey that they might be a more trustworthy buyer than a financial company, even though they may not be."

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Due diligence with foreign publishers can be a confusing and laborious process. "Europeans often have a huge due diligence team of 20 or 30 people and an approach that's not always conducive to getting a deal done," said Engros. "They may bring checklists that aren't applicable to U.S. businesses and they may have some misconceptions about U.S. business. British buyers often think long-term indemnity is part of the U.S. process when that's not the case."

Debt financing in Europe is also more complicated and a third-party is often required to conduct due diligence, while in the U.S. it's typically done in-house, according to Veronis Suhler Stevenson co-CEO Jeffrey Stevenson.

Due Diligence Minefields

Companies in emerging markets are often attractive to U.S. buyers because top line growth is often more than 20 percent--much greater than top line growth for publishers in mature markets (and foreign sellers will often demand higher multiples than a U. …

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