Valuing Publishing Companies
CHARLES K. OPPENHEIMER, JR.
There are many types of publishing companies. The publishing industry includes newspapers, magazines, newsletters, books, technical publications, and others, and there are dozens of ways to value them. The method or methods used will depend somewhat on the purpose of the valuation, such as estate planning, sale of the company, buy/sell agreements, shareholder disputes, for tax purposes, and so on. The method used will often also depend on the profitability of the company being valued. The most frequently used method is a Multiple of Cash Flow; however, if the company is not profitable, alternative methods such as Fair Market Value of Assets or an Amount Per Subscriber must be used.
First I will deal with the most often used, most accurate, and generally the most financially sound method, Multiple of Cash Flow, often referred to as EBITDA or Recast EBITDA (earnings before interest, taxes, depreciation and amortization). Recasting is often done to normalize the cash flow, that is, adjustments to normalize an owner's salary and benefits, to eliminate one-time expenses such as the cost of defending a lawsuit; to install a major piece of equipment, to recalculate expensed items that would normally have been capitalized, and so on. In general, the purpose is to adjust cash flow to what a new owner