Who Buys Publishing Companies And What Do They Pay?

April 1998
by Stephen J. Kerr

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This is an article that I have wanted to write for some time. It may clear up some questions you have regarding the fair market value of your own publishing company in comparison to the deals that you read about in Publishers Weekly or Book Publishing Reports. At some time, if you are lucky, you will sell your publishing company. The unhappy alternatives are that: (1) you go out of business and fade away; (2) you die; or (3) your children take over the business with very little real benefit to you. In today’s society where few children succeed their parents in the same line of work, #3 is a less and less likely scenario.

Profits Are the Key to Value

I have written many articles on the subject of valuing publishing companies. To do the job right, we usually take a look at the performance of the company over several years to determine what the true “cash flow” of the business is. To this number, we apply a “multiple” on earnings to arrive at a suggested price. In valuing a publishing company, the balance sheet of the business tends to be an afterthought. The profitability of the business is the key. This article concerns itself mostly with multiples of earnings used to establish the value. The truth is that nothing multiplied by something is still nothing. Without profits, a discussion of multiples is moot.

A Closer Look at Multiples
In real estate, the “multiple” is expressed as the capitalization rate. If you have a building that is generating $100,0…IBPA Members – Click here to view the full article (login required).

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