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Introduction To Peachtree 2009 Final

Peachtree Media Advisors provides investment banking services focused on mergers and acquisitions, capital raises, and valuations for media companies. They have expertise in sectors like online publishing, search/analytics, and out-of-home advertising. While online advertising growth is expected to slow in 2009 due to economic conditions, interactive media continues gaining share as consumers engage more with digital options. Major industry players expect continued growth, but at lower rates, and will focus on improving ad relevance and acquisitions.

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2009  Introduction to PEACHTREE MEDIA ADVISORS, INC.  PEACHTREE MEDIA ADVISORS, INC. 
Discussion I. About Peachtree Media Advisors, Inc. II. Digital Media and Out-of-Home Media Market Trends III. Public Market Company Valuations IV. M&A Environment V. Maximizing Value VI. The Peachtree Sale Process 2 PEACHTREE MEDIA ADVISORS, INC. 
About Peachtree 3 PEACHTREE MEDIA ADVISORS, INC. 
About Peachtree Peachtree provides investment banking services on growth and smaller middle market transactions in the media and information industries Over 22 completed transactions Focus on maximizing value at each stage of the process Substantial insight in core industry markets – 12+ years of media industry focus Senior level access to leading industry executives, investors and entrepreneurs In-depth technical and financial skills for value-enhancing deal structuring Insight Insight Service Service Focus Focus 4 PEACHTREE MEDIA ADVISORS, INC. 
About Peachtree Services Capital Raise –– Peachtree has aasubstantial amount of experience helping media Capital Raise Peachtree has substantial amount of experience helping media companies raise growth and acquisition financing from venture capital and private companies raise growth and acquisition financing from venture capital and private equity firms; equity firms; Mergers and Acquisitions –– Peachtree maximizes value for sell side clients as well Mergers and Acquisitions Peachtree maximizes value for sell side clients as well as strategic and financial buyers seeking add-on or platform acquisitions; as strategic and financial buyers seeking add-on or platform acquisitions; Sales and Divestitures –– Peachtree maximizes value on the sale of properties or the Sales and Divestitures Peachtree maximizes value on the sale of properties or the divestiture of non-strategic assets through aacontrolled auction process; divestiture of non-strategic assets through controlled auction process; Valuations –– Peachtree has the ability to combine operational insight, market trends Valuations Peachtree has the ability to combine operational insight, market trends and technical analysis in determining thorough and well-documented valuations; and and technical analysis in determining thorough and well-documented valuations; and Strategic Partner/Business Development –– With unprecedented insight into end Strategic Partner/Business Development With unprecedented insight into end user needs, an ability to navigate niche markets and analyze revenue models, user needs, an ability to navigate niche markets and analyze revenue models, Peachtree is able to assist lower-middle market companies in developing strategic Peachtree is able to assist lower-middle market companies in developing strategic relationships in order to drive revenue growth. relationships in order to drive revenue growth. 5 PEACHTREE MEDIA ADVISORS, INC. 
Primary Peachtree Sectors New Media, Out-of-Home & Interactive Marketing Services Search/ Analytics/ Business Consumer Ad Serving Services Commerce Out-of-Home • Social Networking • Search • B2B • Transactions/ • Alternative Auctions Media • Photos/Sharing • Ad Serving • Ad Networks &Technology • Travel/Rental/ • Ambient • Blogs/User • Agency/SEM/SEO Housing Generated Content • Web Analytics/ • Billboards • Lead CMS • Jobs/ • Online Publishing Gen/Customer • Digital Signage Classifieds • Web Applications Acquisition • Aggregator • In-store/Point- • E-commerce/ • Enabling/IT • Interactive of-Purchase • Ad Supported Comparison Marketing Services Shopping • Transit • Video • Online Games 6 PEACHTREE MEDIA ADVISORS, INC. 
Select Transactions Seller Buyer Client Sector M&A Advisory Services Publishers Clearing House (PCH.com) Very large player in the sweepstakes and prizes arena AdSpace Networks The Walnut Group and current investors $20 million equity raise series E; alternative digital out-of-home advertising The Governance Institute National Research Corp. Best practices research and peer-to-peer benchmarking data AdSpace Networks Steelpoint Capital and current investors $20 million equity raise series D; alternative digital out-of-home advertising Spin Magazine McEvoy Group Consumer lifestyle magazine, alternative, youth, music, early adopter Vibe Magazine The Wicks Group of Companies Consumer lifestyle magazine, urban, youth, music, early adopter iMedia Communications dmg world media Interactive advertising conference and online content provider INFORMEX United Business Media/CMP Chemicals industry tradeshow Blood-Horse Publications Valuation Enthusiast publishing - thoroughbred racing industry ASI (Advertising Specialty Institute) Valuation Marketing and advertising promotional services Sundance Publishing Haights Cross Communications Educational publishing StockVal Automatic Data Processing Fundamental historical stock pricing data Strategic Legal Resources Staff Mark Professional legal temporary and permanent staffing agency The Practice Builder Organization Medical World Communications Business information services and medical professional education i-traffic Agency.com Internet direct marketing/advertising agency Entertainment Publications (a The Carlyle Group Marketing and information service (local coupon books) Cendant subsidiary) HCIA Datis VSS Communications Partners Benchmarking healthcare clinical information data *Client in blue. 7 PEACHTREE MEDIA ADVISORS, INC. 
New Media &  Interactive Marketing Services Trends 8 PEACHTREE MEDIA ADVISORS, INC. 
All Things Considered, Online Advertising Growth is Expected U.S. online ad spending to reach $24.9 billion in 2008 Reforecast down from $25.9 billion forecasted in March 2008 17.4% growth is significant relative to other media sectors (eMarketer 2008) Search remains the dominant category Source: eMarketer, 2008.    IDC recently stated its previous forecast of 10% growth in U.S. online ad spending in 2009 to be "too optimistic“ The number of dissenting voices and skeptics is increasing with regard to positive online advertising growth % in 2009 9 PEACHTREE MEDIA ADVISORS, INC. 
Expectations and themes for 2009 IAB 2009 Themes (source Web site) Interactive continues to grow despite strong economic headwinds Medium girded by its breadth of options, from above-the-line to below-the-line Consumers increasingly embracing digital media in all forms Share shift by marketers from offline to online to tap into the variety, reach, targetability, and effectiveness of interactive media Emerging platforms provide new opportunities for marketers to engage and learn from their customers Google 2009 Themes (source 10K) Expect continued growth in the future, but at a declining growth rate Improve display ad relevance and terminate relationships with network members who do not meet quality requirements Acquisitions that enhance expertise in engineering, technology and product offerings Grow its own sites since profit margins for AdSense are lower because of shared advertiser fees Increasing cost of revenues as a result of forecasted increases in traffic acquisition costs, data center costs and credit card and other transaction fees, as well as content acquisition costs 10 PEACHTREE MEDIA ADVISORS, INC. 
Peachtree Media Advisors 2009 Themes Back to the fundamentals – Media 101: Media informs and helps people become a better at what they do or want to do The new “scale” will be specific eyeballs, not just traffic Continued movement to niche-environments with category-specific advertisers 100K gamers or green enthusiasts are more valuable to marketers than 1mm entertainment buffs Social media is an evolving train that cannot be stopped (cut off – the long tail will reemerge) Social media will get better, stronger and more meaningful even as brand advertisers pull back Recommendations by real or perceived friends are the most powerful forms of influence Online video has an identity crises - television viewership is at an all-time high Interactive marketing services will be revived by e-commerce companies Lead gen and performance based offering higher quality traffic will be preferred to display advertising 11 PEACHTREE MEDIA ADVISORS, INC. 
What a recovery will look like (in a perfect new media world) New Debt Issuance – Q1 2009 Paper flowing indicates confidence in expected future cash flows by corporations Commodities Prices – Q2 2009 Decrease in gold indicates a flight to better returns on investment versus quality Increase in oil prices indicates more goods being shipped and more commerce Interest Rates – Q3 2009 Increase in interest rates represents a competitive environment for investment capital Stabilized home prices – Q4 2009 Housing stabilization will be helped from stimulus package and relatively recession-proof sectors in the economy (healthcare, government, college, etc.) producing first time buyers Jobs – Q1 2010 A decrease in the unemployment rate is a lagging indicator that the economy is growing Public market equity values will begin to increase significantly at this point Substantial Increase in Advertising – Q2 2010 Marketing and advertising will increase significantly to reach a re-energized consumer Increased M&A activity – Q3 2010 Buying is typically preferred to building – who has time to build when Christmas is right around the corner? 12 PEACHTREE MEDIA ADVISORS, INC. 
Ad Spending Moving to Niche Environments The effects that cable television had on broadcast TV are the same effects that niche Web sites are having on the large portals…sites developing niche content are increasingly attracting loyal and devoted audiences Brand advertisers have cut the long-tail out of their budgets (for the moment) Social networking and user- generated content sites are evolving into niche environments “Community” is back, except this time it is category- specific Gamer/Casual Gamer Green Living Moms/Pregnancy Movies Tech/Gadgets Peachtree Media Advisors, Inc. & InnerVision Labs Travel/Buddy Etc. 13 PEACHTREE MEDIA ADVISORS, INC. 
Social Media Growth – Bloggers & Online Marketers Social networks are providing blogging platforms for their constituents Blogging has become a truly mass media comScore MediaMetrix (August 2008) Blogs: 77.7 mil unique visitors in the US Facebook: 41.0 mil and MySpace 75.1 mil Total Internet audience 188.9 million eMarketer (May 2008) 94.1 million US blog readers in 2007 (50% of Internet users) 22.6 million US bloggers in 2007 (12%) Universal McCann (March 2008) 184 million WW have started a blog and 26.4 US 346 million WW read blogs and 60.3 US 77% of active Internet users read blogs Ad spending on U.S. social-networking sites to reach $2.15 billion by 2010 (eMarketer 2008) Source: eMarketer, 2008.    14 PEACHTREE MEDIA ADVISORS, INC. 
Types of Content Posted on Social Networks “What do you do with your social networking profile?” Active Internet Universe Source: Universal McCann Study 2008. 15 PEACHTREE MEDIA ADVISORS, INC. 
“Bloggers are influencing the new media landscape” Universal McCann By 2012, more than 145 million people – or 67% of the US Internet population – will be reading blogs at least once Key Social Media Platforms per month (Univ McCann) The number of people creating blogs in the US will also grow reaching 34.7 million people by 2012— 16% of the Internet population US blog advertising will reach $746 million in 2012, up from $283 million in 2007 (eMarketer) All blogs are not created equal though (Technorati Authority Top 100) Source: Universal McCann Study 2008. 16 PEACHTREE MEDIA ADVISORS, INC. 
The newspaper bail‐out could be the blogosphere Social media is transforming the way people interact The number of people getting their product & lifestyle information from a blog after a Web search is exponentially higher than that for newspapers Blogging receives a disproportionately small share of the advertising spend The #1 problem with blogging is credibility Newspapers must radically rethink their business models Becoming a rating service or journalistic grader for the blogging community is one way to generate more revenue Newspapers can become a TRUSTe for journalistic integrity and brand-safe environment Bloggers could pass some type of test to become a NY Times, Wall Street Journal or USA Today Accredited News Source Newspapers would police the integrity of the content Penalties for not sourcing facts Discontinued membership would affect advertising dollars Newspapers could leverage their ad sales to develop blogger ad networks 17 PEACHTREE MEDIA ADVISORS, INC. 
Place‐Based & Digital Out‐of‐Home Media  18 PEACHTREE MEDIA ADVISORS, INC. 
Place based media/digital signage Digital out-of-home companies are at the intersection of several important “long-term” trends Shift from traditional to alternative media channels Shift from static to digital media Increasing advertiser awareness in the power of the retail environment Increasing need for mass reach media vehicles with local targeting capabilities out-of-home represents a substantial roll-up opportunity still Advertisers “get it,” but do not want to risk it…at least right now Digital OOH companies are convincing brand marketer first and then the next step is brand marketer to get advertising agency on board Sales cycle is unsustainably long Targeted lifestyle destinations with endemic advertising bases are better positioned Consumer leisure destinations Bars and restaurants Spas and gyms Movie theaters, parks and family entertainment centers 19 PEACHTREE MEDIA ADVISORS, INC. 
New out‐of‐home/narrowcast networks reach “on the go” consumers Television Newspaper/ Magazines Theaters Billboards Malls/Stores Generate Awareness Drive Interest Impact Sales Out Out of Home of Home - $5.1B Radio - Radio $17.9B Malls Cinema - $0.350B Retail Malls - $0.200B Super Markets Arbitron Study, March 2004 20 PEACHTREE MEDIA ADVISORS, INC. 
Public Market Company Valuations 21 PEACHTREE MEDIA ADVISORS, INC. 
Digital Media Public Market Values Comparable Public Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Online Advertising / Search Bankrate Inc. 736 0 41 695 152 41 4.6x 17.1x Google Inc. 98,750 0 14,410 84,340 20,920 7,620 4.0x 11.1x IAC/InterActiveCorp 2,230 96 1,460 866 1,470 35 0.6x 24.5x Internet Brands 258 0 53 204 102 31 2.0x 6.6x SN Interactive, Inc. 3,890 135 25 4,000 1,580 694 2.5x 5.8x The Knot, Inc. 279 1 69 211 104 17 2.0x 12.3x WebMD 1,360 0 333 1,027 368 77 2.8x 13.4x Yahoo! Inc. 17,610 63 3,210 14,463 7,230 1,290 2.0x 11.2x MEAN 2.6x 12.8x Interactive Marketing Services Digital River Inc. 931 195 495 631 395 99 1.6x 6.4x Harris Interactive Inc. 34 28 25 36 234 12 0.2x 3.0x Kowabunga! Inc. 4 12 3 13 94 7 0.1x 1.8x LivePerson Inc. 89 0 24 65 72 5 0.9x 13.8x Marchex Inc. 220 1 29 192 149 21 1.3x 8.9x ValueClick Inc. 612 0 89 523 676 119 0.8x 4.4x Omniture Inc.* 787 12 77 722 256 8 2.8x 90.2x *Removed from mean. MEAN 0.8x 6.4x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. 22 PEACHTREE MEDIA ADVISORS, INC. 
Digital Media Public Market Values Comparable Public Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple E- Commerce Amazon.com Inc. 22,840 435 2,320 20,955 18,140 1,060 1.2x 19.8x eBay Inc. 18,220 0 3,640 14,580 8,690 2,930 1.7x 5.0x Expedia 2,490 1,140 740 2,890 2,990 730 1.0x 4.0x Monster Worldwide 1,540 247 639 1,148 1,430 312 0.8x 3.7x Move, Inc. 251 65 114 202 285 11 0.7x 19.0x Priceline 2,900 468 452 2,915 1,810 328 1.6x 8.9x MEAN 1.2x 10.0x Online B2B Content comScore Inc. 370 1 68 303 111 18 2.7x 17.3x Forrester Research 578 0 208 370 236 39 1.6x 9.6x Gartner Inc. 1,730 425 145 2,009 1,300 209 1.5x 9.6x Jupitermedia Corp. 15 79 4 89 137 17 0.7x 5.2x TechTarget 191 4 59 136 107 15 1.3x 9.0x TheStreet.com Inc. 100 0 78 23 75 12 0.3x 1.9x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. MEAN 1.3x 8.8x 23 PEACHTREE MEDIA ADVISORS, INC. 
Diversified Media and Overall Digital Media Public Market Values Comparable Public Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Diversified Media CBS 6,010 7,100 553 12,557 14,180 2,920 0.9x 4.3x Comcast Corp 50,510 33,690 2,920 81,280 33,510 12,880 2.4x 6.3x Discovery Communications 4,080 3,909 92 7,897 3,190 1,040 2.5x 7.6x Entravision Communications 135 473 118 490 242 82 2.0x 6.0x Gannett Co., Inc. 1,970 3,910 123 5,757 6,930 1,770 0.8x 3.3x HSN, Inc. 410 389 56 742 2,920 169 0.3x 4.4x McGraw-Hill 7,570 1,500 485 8,585 6,510 1,580 1.3x 5.4x Media General 54 750 14 790 861 129 0.9x 6.1x New York Times 1,110 1,130 46 2,194 3,040 433 0.7x 5.1x NewsCorp 24,880 13,490 5,500 32,870 33,440 6,430 1.0x 5.1x Time Warner 37,600 37,990 4,360 71,230 47,320 13,590 1.5x 5.2x Washington Post 3,800 509 416 3,893 4,420 597 0.9x 6.5x MEAN 1.3x 5.4x OVERALL MEAN 1.5x 8.4x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. OVERALL MEDIAN 1.3x 6.3x 24 PEACHTREE MEDIA ADVISORS, INC. 
Out‐of‐Home Public Market Values Comparable Public Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Out of Home Alloy Inc. 59 0 21 37 216 11 0.2x 3.6x Clear Channel Outdoor Holdings 2,280 2,580 82 4,778 3,440 885 1.4x 5.4x Lamar Advertising 1,260 2,890 22 4,128 1,220 531 3.4x 7.8x National Cinemedia 422 789 45 1,166 352 175 3.3x 6.7x Focus Media Holding Ltd.* 1,270 0 381 889 814 260 1.1x 3.4x MEAN 2.1x 5.9x Diversified Media CBS 6,010 7,100 553 12,557 14,180 2,920 0.9x 4.3x Comcast Corp 50,510 33,690 2,920 81,280 33,510 12,880 2.4x 6.3x Discovery Communications 4,080 3,909 92 7,897 3,190 1,040 2.5x 7.6x Entravision Communications 135 473 118 490 242 82 2.0x 6.0x Gannett Co., Inc. 1,970 3,910 123 5,757 6,930 1,770 0.8x 3.3x HSN, Inc. 410 389 56 742 2,920 169 0.3x 4.4x McGraw-Hill 7,570 1,500 485 8,585 6,510 1,580 1.3x 5.4x Media General 54 750 14 790 861 129 0.9x 6.1x New York Times 1,110 1,130 46 2,194 3,040 433 0.7x 5.1x NewsCorp 24,880 13,490 5,500 32,870 33,440 6,430 1.0x 5.1x Time Warner 37,600 37,990 4,360 71,230 47,320 13,590 1.5x 5.2x Washington Post 3,800 509 416 3,893 4,420 597 0.9x 6.5x MEAN 1.3x 5.4x *Removed from mean. OVERALL MEAN 1.5x 5.5x Sources: CapitalIQ; Company SEC Filings. Stock Price 12/30/08. OVERALL MEDIAN 1.2x 5.4x 25 PEACHTREE MEDIA ADVISORS, INC. 
New Media  M&A Environment 26 PEACHTREE MEDIA ADVISORS, INC. 
Current M&A Environment ‐ It is a buyer’s market except buyers are not buying Value is directly tied to expected future cash flows and there is disagreement with estimates Few new media targets are profitable ROI on previous splashy acquisitions and investments is difficult to calculate in this environment Seller choices are to be profitable, raise capital in a difficult environment or lower valuation expectations Online media valuations across the board have decreased There is a clear disconnect with valuation expectations today and where they were at one and two years ago Sellers refuse to sell at current valuation multiples Premium will be placed on the fundamentals: Media101 Highly engaged audience – media kit with targeting a specific demographic group Recurring and entrenched category specific advertising base Transactions to settle in the 10x to 12x EBITDA range Valuation gap: Buyers want 6x to 8x EBITDA; sellers want 14x to 16x EBITDA 27 PEACHTREE MEDIA ADVISORS, INC. 
What this means for New Media/Internet Sellers Interactive advertising and marketing services valuations have dropped significantly in the last year In the near-term, buyers will put a premium on EBITDA, direct relationships with advertisers and consistent revenue Technology and application providers will raise money but have few buyers In the short-term, this is not a good capital raise environment for digital media companies VC’s have taken a “picks and shovels” mentality to digital media – they are only focusing on tools, enabling technology and applications Unfortunately, the advertising gold for the publisher/miners is fickle and elusive Follow the money and read what the boss reads Every VC professional under the age of 40 is reading up on green tech and healthcare The digital media M&A market will rebound in late 2009 and early 2010 Buyers will expect a one-to-one relationship with highly engaged audiences Companies relying totally on ad networks for revenue and search for its audience will be at a slight disadvantage when the acquisition wave starts Buyers will seek to buy new and social media “brands” first 28 PEACHTREE MEDIA ADVISORS, INC. 
Pros & Cons (Strategic vs. Private Equity/Venture Capital) Strategic Acquirer Pros Private Equity/VC Pros Achieve highest valuation possible Participate in upside (5-7 years) Ability to structure an earn-out Be a consolidator and not a “consolidatee” Sell on forward earnings Maintain autonomy and control* Accept paper as well as cash Answer only to your Board of consideration at Closing Directors/Investors Leverage buyer’s sales and operational Take some chips off the table infrastructures Strategic Acquirer Cons Private Equity/VC Cons Having someone to report to Lower valuation Sticking to a rigid budget May be difficult to change course (PE/VC Potential personality conflicts between firms do not speak the language of the employees (“we own you”) landscape as well as Strategic Buyer) Potential loss of corporate identity Typically unfavorable deal structures when timeframe is more than 7 years *Preferred shares that Pay-In-Kind or interest rate is more shares instead of cash resulting in loss of control 29 PEACHTREE MEDIA ADVISORS, INC. 
Peachtree Maximizes Value 30 PEACHTREE MEDIA ADVISORS, INC. 
How do you value a digital or new media company? Technology Media Multiples Multiples Engagement by a Certain Demographic Group Digital Technology & Relevant & Distribution Media Kit + Platform Tech Savvy Engaging Delivery Content Web Mobile Platform = Video Success Distribution w/o content cannot Software & survive Technology Media World World 31 PEACHTREE MEDIA ADVISORS, INC. 
In many cases, the traditional ways of determining value fall short Comparable private M&A transactions Public market company valuations Discounted cash flow analysis Unfortunately, value is in the eye of the buyer Most transactions in new media are not Comparable private M&A transactions comparable, each deal has its own unique attributes Public companies are generally larger, more Public market company valuations established entities that have diversified revenue streams across several media sectors Expansion = Capex Discounted cash flow analysis Growth = Investment in Staff & Marketing Both lower cash flow 32 PEACHTREE MEDIA ADVISORS, INC. 
Driving or maximizing the value of your company in a capital raise Investors look for long-term expansion contracts (OOH) and repeat customers (Digital Media) Money is put to work sooner rather than later Functional network operating centers (OOH) Working and scalable infrastructure Proven and capable management teams Profitable business model (or soon to be profitable) Strong exit Strategic buyers seek profitable businesses with national networks (OOH) or recurring revenue base (Digital Media) Ability to take them in a different direction (complementary product offering) Leverage their existing infrastructure (back-office accounting, sales & marketing) Pump their products through your existing sales channels Bring technical capabilities that you posses to their business Believe that they can do what you do, better and faster, but want your footprint Are tired of competing with you 33 PEACHTREE MEDIA ADVISORS, INC. 
Maximizing the value of your company for a financial or strategic buyer Strategic buyers seek to acquire at least one of the following: Growing businesses New technology Customer base - ability to sell their products to your customers Product/media channel - leveraging their sales infrastructure to secure more of their current advertisers’ marketing budgets The key to maximizing value is to find the potential acquirer that will gain the most from owning your business Financial investors seek to manage their risk by investing in companies with Proven management teams Existing customers Clear problem solved or defined need Large and growing addressable market Scalable business models The key to maximizing value is to be in multiple discussions with investors that specialize/target investment opportunities in your sector 34 PEACHTREE MEDIA ADVISORS, INC. 
The Peachtree M&A Process 35 PEACHTREE MEDIA ADVISORS, INC. 
Peachtree Transaction Process Five primary phases (4 to 6 month process) Information memorandum Marketing/expressions of interest Management presentations Due diligence/letter of intent Final negotiations/close 36 PEACHTREE MEDIA ADVISORS, INC. 
Information memorandum – Month 1 Initial information request Develop strategic positioning Most compelling investment merits Highlight buyer interests Create information memorandum Exec Summary Investment Merits Market Served Products & Services Operations Growth Opportunities Finance Management & Organization Buyer target list 37 PEACHTREE MEDIA ADVISORS, INC. 
Marketing/expressions of interest – Months 2 and 3 Initial contact with senior level decision makers Non-disclosure agreement Dissemination of information memorandum Process letter requesting non- binding expression of interest Terms Initial valuation Preliminary deal structure Source of capital Review bids 38 PEACHTREE MEDIA ADVISORS, INC. 
Management presentations – Month 4 Select/invite prospects to go to the next round Management presentation An informative presentation given by management to select bidders Q&A session Discussion of process and next steps Second round process letter sent to management presentation attendees Request for Letter of Intent (LOI) Terms of deal structure Indicate initial terms of purchase and sale agreement Bidder proposed capital structure 39 PEACHTREE MEDIA ADVISORS, INC. 
Due Diligence – Month 5 Due diligence Continued discussion with management via conference call Extensive review of data room, legal documents, agreements and operating contracts 40 PEACHTREE MEDIA ADVISORS, INC. 
Letter of Intent/Final Negotiation/Closing – Month 6 Review of LOIs Comparison of final bids Final negotiations with top bidders Choosing the final bidder Confirmatory due diligence Closing 41 PEACHTREE MEDIA ADVISORS, INC. 
About John Doyle Established by John Doyle, Peachtree Media Advisors, Inc. serves the interactive marketing, digital and out-of-home sectors of media. Mr. Doyle has more than twelve years of media investment banking experience, having worked as a senior level investment banker at Veronis Suhler Stevenson and JEGI. After graduating from Dartmouth College In 1995 with a double major of Engineering and Economics, Mr. Doyle specialized in the business information services and specialty media and marketing services at Veronis Suhler Stevenson (VSS). While at VSS, Mr. Doyle performed M&A advisory services to sell-side and buy-side clients, in addition to developing platform acquisition strategies, performing leveraged buy out analysis and conducting due diligence for the VSS private equity funds. In 2000, Mr. Doyle successfully launched a digital production company in Los Angeles, CA, developing both online and offline digital content. In 2001, the company transitioned to focusing solely on raising money for offline film and television projects. Mr. Doyle has worked with Conde Nast, Fox Cable Networks, 20th Century Fox, Writers & Artists Agency and Revolution Studios. In 2004, Mr. Doyle returned to media investment banking with The Jordan, Edmiston Group, Inc. His primary responsibilities included developing qualitative and quantitative analytical materials at each phase of the M&A transaction process. Highly experienced in valuing, analyzing and positioning media businesses, Mr. Doyle was responsible for closing more than ten media M&A transactions. Peachtree Media Advisors, Inc. was established to serve the merger and acquisition advisory needs of the interactive marketing, digital consumer and out-of-home sectors of media. With a substantial amount of media operations and investment banking experience, Mr. Doyle is able to deliver expert advice in valuing new media assets, positioning companies during the sale process, developing information memoranda to send to potential buyers or investors, coaching management through presentations, developing bids/deal structure analysis and managing the due diligence process to closing. 42 PEACHTREE MEDIA ADVISORS, INC. 
Industry Relationships 43 PEACHTREE MEDIA ADVISORS, INC. 
Peachtree Media Advisors, Inc. February 2009 50 Vanderbilt Ave., #30 New York, NY 10017 T: (212) 570-1009 F: (646) 607-1786 www.PeachtreeMediaAdvisors.com ▪ JohnD@PeachtreeMediaAdvisors.com 44 PEACHTREE MEDIA ADVISORS, INC. 

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Introduction To Peachtree 2009 Final

  • 1.
    2009  Introduction to PEACHTREE MEDIA ADVISORS, INC.  PEACHTREE MEDIA ADVISORS, INC. 
  • 2.
    Discussion I. About Peachtree Media Advisors, Inc. II. Digital Media and Out-of-Home Media Market Trends III. Public Market Company Valuations IV. M&A Environment V. Maximizing Value VI. The Peachtree Sale Process 2 PEACHTREE MEDIA ADVISORS, INC. 
  • 3.
    About Peachtree 3 PEACHTREE MEDIA ADVISORS, INC. 
  • 4.
    About Peachtree Peachtreeprovides investment banking services on growth and smaller middle market transactions in the media and information industries Over 22 completed transactions Focus on maximizing value at each stage of the process Substantial insight in core industry markets – 12+ years of media industry focus Senior level access to leading industry executives, investors and entrepreneurs In-depth technical and financial skills for value-enhancing deal structuring Insight Insight Service Service Focus Focus 4 PEACHTREE MEDIA ADVISORS, INC. 
  • 5.
    About Peachtree Services CapitalRaise –– Peachtree has aasubstantial amount of experience helping media Capital Raise Peachtree has substantial amount of experience helping media companies raise growth and acquisition financing from venture capital and private companies raise growth and acquisition financing from venture capital and private equity firms; equity firms; Mergers and Acquisitions –– Peachtree maximizes value for sell side clients as well Mergers and Acquisitions Peachtree maximizes value for sell side clients as well as strategic and financial buyers seeking add-on or platform acquisitions; as strategic and financial buyers seeking add-on or platform acquisitions; Sales and Divestitures –– Peachtree maximizes value on the sale of properties or the Sales and Divestitures Peachtree maximizes value on the sale of properties or the divestiture of non-strategic assets through aacontrolled auction process; divestiture of non-strategic assets through controlled auction process; Valuations –– Peachtree has the ability to combine operational insight, market trends Valuations Peachtree has the ability to combine operational insight, market trends and technical analysis in determining thorough and well-documented valuations; and and technical analysis in determining thorough and well-documented valuations; and Strategic Partner/Business Development –– With unprecedented insight into end Strategic Partner/Business Development With unprecedented insight into end user needs, an ability to navigate niche markets and analyze revenue models, user needs, an ability to navigate niche markets and analyze revenue models, Peachtree is able to assist lower-middle market companies in developing strategic Peachtree is able to assist lower-middle market companies in developing strategic relationships in order to drive revenue growth. relationships in order to drive revenue growth. 5 PEACHTREE MEDIA ADVISORS, INC. 
  • 6.
    Primary Peachtree Sectors New Media, Out-of-Home & Interactive Marketing Services Search/ Analytics/ Business Consumer Ad Serving Services Commerce Out-of-Home • Social Networking • Search • B2B • Transactions/ • Alternative Auctions Media • Photos/Sharing • Ad Serving • Ad Networks &Technology • Travel/Rental/ • Ambient • Blogs/User • Agency/SEM/SEO Housing Generated Content • Web Analytics/ • Billboards • Lead CMS • Jobs/ • Online Publishing Gen/Customer • Digital Signage Classifieds • Web Applications Acquisition • Aggregator • In-store/Point- • E-commerce/ • Enabling/IT • Interactive of-Purchase • Ad Supported Comparison Marketing Services Shopping • Transit • Video • Online Games 6 PEACHTREE MEDIA ADVISORS, INC. 
  • 7.
    Select Transactions Seller Buyer Client Sector M&A Advisory Services Publishers Clearing House (PCH.com) Very large player in the sweepstakes and prizes arena AdSpace Networks The Walnut Group and current investors $20 million equity raise series E; alternative digital out-of-home advertising The Governance Institute National Research Corp. Best practices research and peer-to-peer benchmarking data AdSpace Networks Steelpoint Capital and current investors $20 million equity raise series D; alternative digital out-of-home advertising Spin Magazine McEvoy Group Consumer lifestyle magazine, alternative, youth, music, early adopter Vibe Magazine The Wicks Group of Companies Consumer lifestyle magazine, urban, youth, music, early adopter iMedia Communications dmg world media Interactive advertising conference and online content provider INFORMEX United Business Media/CMP Chemicals industry tradeshow Blood-Horse Publications Valuation Enthusiast publishing - thoroughbred racing industry ASI (Advertising Specialty Institute) Valuation Marketing and advertising promotional services Sundance Publishing Haights Cross Communications Educational publishing StockVal Automatic Data Processing Fundamental historical stock pricing data Strategic Legal Resources Staff Mark Professional legal temporary and permanent staffing agency The Practice Builder Organization Medical World Communications Business information services and medical professional education i-traffic Agency.com Internet direct marketing/advertising agency Entertainment Publications (a The Carlyle Group Marketing and information service (local coupon books) Cendant subsidiary) HCIA Datis VSS Communications Partners Benchmarking healthcare clinical information data *Client in blue. 7 PEACHTREE MEDIA ADVISORS, INC. 
  • 8.
    New Media &  Interactive Marketing Services Trends 8 PEACHTREE MEDIA ADVISORS, INC. 
  • 9.
    All Things Considered, Online Advertising Growth is Expected U.S.online ad spending to reach $24.9 billion in 2008 Reforecast down from $25.9 billion forecasted in March 2008 17.4% growth is significant relative to other media sectors (eMarketer 2008) Search remains the dominant category Source: eMarketer, 2008.    IDC recently stated its previous forecast of 10% growth in U.S. online ad spending in 2009 to be "too optimistic“ The number of dissenting voices and skeptics is increasing with regard to positive online advertising growth % in 2009 9 PEACHTREE MEDIA ADVISORS, INC. 
  • 10.
    Expectations and themes for 2009 IAB 2009Themes (source Web site) Interactive continues to grow despite strong economic headwinds Medium girded by its breadth of options, from above-the-line to below-the-line Consumers increasingly embracing digital media in all forms Share shift by marketers from offline to online to tap into the variety, reach, targetability, and effectiveness of interactive media Emerging platforms provide new opportunities for marketers to engage and learn from their customers Google 2009 Themes (source 10K) Expect continued growth in the future, but at a declining growth rate Improve display ad relevance and terminate relationships with network members who do not meet quality requirements Acquisitions that enhance expertise in engineering, technology and product offerings Grow its own sites since profit margins for AdSense are lower because of shared advertiser fees Increasing cost of revenues as a result of forecasted increases in traffic acquisition costs, data center costs and credit card and other transaction fees, as well as content acquisition costs 10 PEACHTREE MEDIA ADVISORS, INC. 
  • 11.
    Peachtree Media Advisors 2009 Themes Backto the fundamentals – Media 101: Media informs and helps people become a better at what they do or want to do The new “scale” will be specific eyeballs, not just traffic Continued movement to niche-environments with category-specific advertisers 100K gamers or green enthusiasts are more valuable to marketers than 1mm entertainment buffs Social media is an evolving train that cannot be stopped (cut off – the long tail will reemerge) Social media will get better, stronger and more meaningful even as brand advertisers pull back Recommendations by real or perceived friends are the most powerful forms of influence Online video has an identity crises - television viewership is at an all-time high Interactive marketing services will be revived by e-commerce companies Lead gen and performance based offering higher quality traffic will be preferred to display advertising 11 PEACHTREE MEDIA ADVISORS, INC. 
  • 12.
    What a recovery will look like (in a perfect new media world) New Debt Issuance – Q1 2009 Paper flowing indicates confidence in expected future cash flows by corporations Commodities Prices – Q2 2009 Decrease in gold indicates a flight to better returns on investment versus quality Increase in oil prices indicates more goods being shipped and more commerce Interest Rates – Q3 2009 Increase in interest rates represents a competitive environment for investment capital Stabilized home prices – Q4 2009 Housing stabilization will be helped from stimulus package and relatively recession-proof sectors in the economy (healthcare, government, college, etc.) producing first time buyers Jobs – Q1 2010 A decrease in the unemployment rate is a lagging indicator that the economy is growing Public market equity values will begin to increase significantly at this point Substantial Increase in Advertising – Q2 2010 Marketing and advertising will increase significantly to reach a re-energized consumer Increased M&A activity – Q3 2010 Buying is typically preferred to building – who has time to build when Christmas is right around the corner? 12 PEACHTREE MEDIA ADVISORS, INC. 
  • 13.
    Ad Spending Moving to Niche Environments The effectsthat cable television had on broadcast TV are the same effects that niche Web sites are having on the large portals…sites developing niche content are increasingly attracting loyal and devoted audiences Brand advertisers have cut the long-tail out of their budgets (for the moment) Social networking and user- generated content sites are evolving into niche environments “Community” is back, except this time it is category- specific Gamer/Casual Gamer Green Living Moms/Pregnancy Movies Tech/Gadgets Peachtree Media Advisors, Inc. & InnerVision Labs Travel/Buddy Etc. 13 PEACHTREE MEDIA ADVISORS, INC. 
  • 14.
    Social Media Growth – Bloggers & Online Marketers Social networks are providing blogging platforms for their constituents Blogging has become a truly mass media comScore MediaMetrix (August 2008) Blogs: 77.7 mil unique visitors in the US Facebook: 41.0 mil and MySpace 75.1 mil Total Internet audience 188.9 million eMarketer (May 2008) 94.1 million US blog readers in 2007 (50% of Internet users) 22.6 million US bloggers in 2007 (12%) Universal McCann (March 2008) 184 million WW have started a blog and 26.4 US 346 million WW read blogs and 60.3 US 77% of active Internet users read blogs Ad spending on U.S. social-networking sites to reach $2.15 billion by 2010 (eMarketer 2008) Source: eMarketer, 2008.    14 PEACHTREE MEDIA ADVISORS, INC. 
  • 15.
    Types of Content Posted on Social Networks “Whatdo you do with your social networking profile?” Active Internet Universe Source: Universal McCann Study 2008. 15 PEACHTREE MEDIA ADVISORS, INC. 
  • 16.
    “Bloggers are influencing the new media landscape” Universal McCann By 2012, more than 145 million people – or 67% of the US Internet population – will be reading blogs at least once Key Social Media Platforms per month (Univ McCann) The number of people creating blogs in the US will also grow reaching 34.7 million people by 2012— 16% of the Internet population US blog advertising will reach $746 million in 2012, up from $283 million in 2007 (eMarketer) All blogs are not created equal though (Technorati Authority Top 100) Source: Universal McCann Study 2008. 16 PEACHTREE MEDIA ADVISORS, INC. 
  • 17.
    The newspaper bail‐out could be the blogosphere Socialmedia is transforming the way people interact The number of people getting their product & lifestyle information from a blog after a Web search is exponentially higher than that for newspapers Blogging receives a disproportionately small share of the advertising spend The #1 problem with blogging is credibility Newspapers must radically rethink their business models Becoming a rating service or journalistic grader for the blogging community is one way to generate more revenue Newspapers can become a TRUSTe for journalistic integrity and brand-safe environment Bloggers could pass some type of test to become a NY Times, Wall Street Journal or USA Today Accredited News Source Newspapers would police the integrity of the content Penalties for not sourcing facts Discontinued membership would affect advertising dollars Newspapers could leverage their ad sales to develop blogger ad networks 17 PEACHTREE MEDIA ADVISORS, INC. 
  • 18.
    Place‐Based & Digital Out‐of‐Home Media  18 PEACHTREE MEDIA ADVISORS, INC. 
  • 19.
    Place based media/digital signage Digitalout-of-home companies are at the intersection of several important “long-term” trends Shift from traditional to alternative media channels Shift from static to digital media Increasing advertiser awareness in the power of the retail environment Increasing need for mass reach media vehicles with local targeting capabilities out-of-home represents a substantial roll-up opportunity still Advertisers “get it,” but do not want to risk it…at least right now Digital OOH companies are convincing brand marketer first and then the next step is brand marketer to get advertising agency on board Sales cycle is unsustainably long Targeted lifestyle destinations with endemic advertising bases are better positioned Consumer leisure destinations Bars and restaurants Spas and gyms Movie theaters, parks and family entertainment centers 19 PEACHTREE MEDIA ADVISORS, INC. 
  • 20.
    New out‐of‐home/narrowcast networks reach “on the go” consumers Television Newspaper/ Magazines Theaters Billboards Malls/Stores Generate Awareness Drive Interest Impact Sales Out Out of Home of Home - $5.1B Radio - Radio $17.9B Malls Cinema - $0.350B Retail Malls - $0.200B Super Markets Arbitron Study, March 2004 20 PEACHTREE MEDIA ADVISORS, INC. 
  • 21.
    Public Market Company Valuations 21 PEACHTREE MEDIA ADVISORS, INC. 
  • 22.
    Digital Media Public Market Values ComparablePublic Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Online Advertising / Search Bankrate Inc. 736 0 41 695 152 41 4.6x 17.1x Google Inc. 98,750 0 14,410 84,340 20,920 7,620 4.0x 11.1x IAC/InterActiveCorp 2,230 96 1,460 866 1,470 35 0.6x 24.5x Internet Brands 258 0 53 204 102 31 2.0x 6.6x SN Interactive, Inc. 3,890 135 25 4,000 1,580 694 2.5x 5.8x The Knot, Inc. 279 1 69 211 104 17 2.0x 12.3x WebMD 1,360 0 333 1,027 368 77 2.8x 13.4x Yahoo! Inc. 17,610 63 3,210 14,463 7,230 1,290 2.0x 11.2x MEAN 2.6x 12.8x Interactive Marketing Services Digital River Inc. 931 195 495 631 395 99 1.6x 6.4x Harris Interactive Inc. 34 28 25 36 234 12 0.2x 3.0x Kowabunga! Inc. 4 12 3 13 94 7 0.1x 1.8x LivePerson Inc. 89 0 24 65 72 5 0.9x 13.8x Marchex Inc. 220 1 29 192 149 21 1.3x 8.9x ValueClick Inc. 612 0 89 523 676 119 0.8x 4.4x Omniture Inc.* 787 12 77 722 256 8 2.8x 90.2x *Removed from mean. MEAN 0.8x 6.4x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. 22 PEACHTREE MEDIA ADVISORS, INC. 
  • 23.
    Digital Media Public Market Values ComparablePublic Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple E- Commerce Amazon.com Inc. 22,840 435 2,320 20,955 18,140 1,060 1.2x 19.8x eBay Inc. 18,220 0 3,640 14,580 8,690 2,930 1.7x 5.0x Expedia 2,490 1,140 740 2,890 2,990 730 1.0x 4.0x Monster Worldwide 1,540 247 639 1,148 1,430 312 0.8x 3.7x Move, Inc. 251 65 114 202 285 11 0.7x 19.0x Priceline 2,900 468 452 2,915 1,810 328 1.6x 8.9x MEAN 1.2x 10.0x Online B2B Content comScore Inc. 370 1 68 303 111 18 2.7x 17.3x Forrester Research 578 0 208 370 236 39 1.6x 9.6x Gartner Inc. 1,730 425 145 2,009 1,300 209 1.5x 9.6x Jupitermedia Corp. 15 79 4 89 137 17 0.7x 5.2x TechTarget 191 4 59 136 107 15 1.3x 9.0x TheStreet.com Inc. 100 0 78 23 75 12 0.3x 1.9x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. MEAN 1.3x 8.8x 23 PEACHTREE MEDIA ADVISORS, INC. 
  • 24.
    Diversified Media and Overall Digital Media Public Market Values ComparablePublic Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Diversified Media CBS 6,010 7,100 553 12,557 14,180 2,920 0.9x 4.3x Comcast Corp 50,510 33,690 2,920 81,280 33,510 12,880 2.4x 6.3x Discovery Communications 4,080 3,909 92 7,897 3,190 1,040 2.5x 7.6x Entravision Communications 135 473 118 490 242 82 2.0x 6.0x Gannett Co., Inc. 1,970 3,910 123 5,757 6,930 1,770 0.8x 3.3x HSN, Inc. 410 389 56 742 2,920 169 0.3x 4.4x McGraw-Hill 7,570 1,500 485 8,585 6,510 1,580 1.3x 5.4x Media General 54 750 14 790 861 129 0.9x 6.1x New York Times 1,110 1,130 46 2,194 3,040 433 0.7x 5.1x NewsCorp 24,880 13,490 5,500 32,870 33,440 6,430 1.0x 5.1x Time Warner 37,600 37,990 4,360 71,230 47,320 13,590 1.5x 5.2x Washington Post 3,800 509 416 3,893 4,420 597 0.9x 6.5x MEAN 1.3x 5.4x OVERALL MEAN 1.5x 8.4x Sources: CapitalIQ; Company SEC Filings. Stock Price 2/27/09. OVERALL MEDIAN 1.3x 6.3x 24 PEACHTREE MEDIA ADVISORS, INC. 
  • 25.
    Out‐of‐Home Public Market Values Comparable Public Company Multiples ($ in millions) Market Total Enterprise LTM LTM REV EBITDA Company Cap. Debt Cash Value Revenue EBITDA Mutiple Multiple Out of Home Alloy Inc. 59 0 21 37 216 11 0.2x 3.6x Clear Channel Outdoor Holdings 2,280 2,580 82 4,778 3,440 885 1.4x 5.4x Lamar Advertising 1,260 2,890 22 4,128 1,220 531 3.4x 7.8x National Cinemedia 422 789 45 1,166 352 175 3.3x 6.7x Focus Media Holding Ltd.* 1,270 0 381 889 814 260 1.1x 3.4x MEAN 2.1x 5.9x Diversified Media CBS 6,010 7,100 553 12,557 14,180 2,920 0.9x 4.3x Comcast Corp 50,510 33,690 2,920 81,280 33,510 12,880 2.4x 6.3x Discovery Communications 4,080 3,909 92 7,897 3,190 1,040 2.5x 7.6x Entravision Communications 135 473 118 490 242 82 2.0x 6.0x Gannett Co., Inc. 1,970 3,910 123 5,757 6,930 1,770 0.8x 3.3x HSN, Inc. 410 389 56 742 2,920 169 0.3x 4.4x McGraw-Hill 7,570 1,500 485 8,585 6,510 1,580 1.3x 5.4x Media General 54 750 14 790 861 129 0.9x 6.1x New York Times 1,110 1,130 46 2,194 3,040 433 0.7x 5.1x NewsCorp 24,880 13,490 5,500 32,870 33,440 6,430 1.0x 5.1x Time Warner 37,600 37,990 4,360 71,230 47,320 13,590 1.5x 5.2x Washington Post 3,800 509 416 3,893 4,420 597 0.9x 6.5x MEAN 1.3x 5.4x *Removed from mean. OVERALL MEAN 1.5x 5.5x Sources: CapitalIQ; Company SEC Filings. Stock Price 12/30/08. OVERALL MEDIAN 1.2x 5.4x 25 PEACHTREE MEDIA ADVISORS, INC. 
  • 26.
    New Media  M&A Environment 26 PEACHTREE MEDIA ADVISORS, INC. 
  • 27.
    Current M&A Environment ‐ Itis a buyer’s market except buyers are not buying Value is directly tied to expected future cash flows and there is disagreement with estimates Few new media targets are profitable ROI on previous splashy acquisitions and investments is difficult to calculate in this environment Seller choices are to be profitable, raise capital in a difficult environment or lower valuation expectations Online media valuations across the board have decreased There is a clear disconnect with valuation expectations today and where they were at one and two years ago Sellers refuse to sell at current valuation multiples Premium will be placed on the fundamentals: Media101 Highly engaged audience – media kit with targeting a specific demographic group Recurring and entrenched category specific advertising base Transactions to settle in the 10x to 12x EBITDA range Valuation gap: Buyers want 6x to 8x EBITDA; sellers want 14x to 16x EBITDA 27 PEACHTREE MEDIA ADVISORS, INC. 
  • 28.
    What this means for New Media/Internet Sellers Interactiveadvertising and marketing services valuations have dropped significantly in the last year In the near-term, buyers will put a premium on EBITDA, direct relationships with advertisers and consistent revenue Technology and application providers will raise money but have few buyers In the short-term, this is not a good capital raise environment for digital media companies VC’s have taken a “picks and shovels” mentality to digital media – they are only focusing on tools, enabling technology and applications Unfortunately, the advertising gold for the publisher/miners is fickle and elusive Follow the money and read what the boss reads Every VC professional under the age of 40 is reading up on green tech and healthcare The digital media M&A market will rebound in late 2009 and early 2010 Buyers will expect a one-to-one relationship with highly engaged audiences Companies relying totally on ad networks for revenue and search for its audience will be at a slight disadvantage when the acquisition wave starts Buyers will seek to buy new and social media “brands” first 28 PEACHTREE MEDIA ADVISORS, INC. 
  • 29.
    Pros & Cons (Strategic vs. Private Equity/Venture Capital) Strategic AcquirerPros Private Equity/VC Pros Achieve highest valuation possible Participate in upside (5-7 years) Ability to structure an earn-out Be a consolidator and not a “consolidatee” Sell on forward earnings Maintain autonomy and control* Accept paper as well as cash Answer only to your Board of consideration at Closing Directors/Investors Leverage buyer’s sales and operational Take some chips off the table infrastructures Strategic Acquirer Cons Private Equity/VC Cons Having someone to report to Lower valuation Sticking to a rigid budget May be difficult to change course (PE/VC Potential personality conflicts between firms do not speak the language of the employees (“we own you”) landscape as well as Strategic Buyer) Potential loss of corporate identity Typically unfavorable deal structures when timeframe is more than 7 years *Preferred shares that Pay-In-Kind or interest rate is more shares instead of cash resulting in loss of control 29 PEACHTREE MEDIA ADVISORS, INC. 
  • 30.
    Peachtree Maximizes Value 30 PEACHTREE MEDIA ADVISORS, INC. 
  • 31.
    How do you value a digital or new media company? Technology Media Multiples Multiples Engagement by a Certain Demographic Group Digital Technology & Relevant & Distribution Media Kit + Platform Tech Savvy Engaging Delivery Content Web Mobile Platform = Video Success Distribution w/o content cannot Software & survive Technology Media World World 31 PEACHTREE MEDIA ADVISORS, INC. 
  • 32.
    In many cases, the traditional ways of determining value fall short Comparable private M&A transactions Public market company valuations Discounted cash flow analysis Unfortunately, value is in the eye of the buyer Most transactions in new media are not Comparable private M&A transactions comparable, each deal has its own unique attributes Public companies are generally larger, more Public market company valuations established entities that have diversified revenue streams across several media sectors Expansion = Capex Discounted cash flow analysis Growth = Investment in Staff & Marketing Both lower cash flow 32 PEACHTREE MEDIA ADVISORS, INC. 
  • 33.
    Driving or maximizing the value of your company in a capital raise Investorslook for long-term expansion contracts (OOH) and repeat customers (Digital Media) Money is put to work sooner rather than later Functional network operating centers (OOH) Working and scalable infrastructure Proven and capable management teams Profitable business model (or soon to be profitable) Strong exit Strategic buyers seek profitable businesses with national networks (OOH) or recurring revenue base (Digital Media) Ability to take them in a different direction (complementary product offering) Leverage their existing infrastructure (back-office accounting, sales & marketing) Pump their products through your existing sales channels Bring technical capabilities that you posses to their business Believe that they can do what you do, better and faster, but want your footprint Are tired of competing with you 33 PEACHTREE MEDIA ADVISORS, INC. 
  • 34.
    Maximizing the value of your company for a financial or strategic buyer Strategic buyers seek to acquire at least one of the following: Growing businesses New technology Customer base - ability to sell their products to your customers Product/media channel - leveraging their sales infrastructure to secure more of their current advertisers’ marketing budgets The key to maximizing value is to find the potential acquirer that will gain the most from owning your business Financial investors seek to manage their risk by investing in companies with Proven management teams Existing customers Clear problem solved or defined need Large and growing addressable market Scalable business models The key to maximizing value is to be in multiple discussions with investors that specialize/target investment opportunities in your sector 34 PEACHTREE MEDIA ADVISORS, INC. 
  • 35.
    The Peachtree M&A Process 35 PEACHTREE MEDIA ADVISORS, INC. 
  • 36.
    Peachtree Transaction Process Five primary phases (4 to 6 month process) Information memorandum Marketing/expressions of interest Management presentations Due diligence/letter of intent Final negotiations/close 36 PEACHTREE MEDIA ADVISORS, INC. 
  • 37.
    Information memorandum – Month 1 Initial information request Develop strategic positioning Most compelling investment merits Highlight buyer interests Create information memorandum Exec Summary Investment Merits Market Served Products & Services Operations Growth Opportunities Finance Management & Organization Buyer target list 37 PEACHTREE MEDIA ADVISORS, INC. 
  • 38.
    Marketing/expressions of interest – Months 2 and 3 Initial contact with senior level decision makers Non-disclosure agreement Dissemination of information memorandum Process letter requesting non- binding expression of interest Terms Initial valuation Preliminary deal structure Source of capital Review bids 38 PEACHTREE MEDIA ADVISORS, INC. 
  • 39.
    Management presentations – Month 4 Select/invite prospects to go to the next round Management presentation An informative presentation given by management to select bidders Q&A session Discussion of process and next steps Second round process letter sent to management presentation attendees Request for Letter of Intent (LOI) Terms of deal structure Indicate initial terms of purchase and sale agreement Bidder proposed capital structure 39 PEACHTREE MEDIA ADVISORS, INC. 
  • 40.
    Due Diligence – Month 5 Due diligence Continued discussion with management via conference call Extensive review of data room, legal documents, agreements and operating contracts 40 PEACHTREE MEDIA ADVISORS, INC. 
  • 41.
    Letter of Intent/Final Negotiation/Closing – Month 6 Review of LOIs Comparison of final bids Final negotiations with top bidders Choosing the final bidder Confirmatory due diligence Closing 41 PEACHTREE MEDIA ADVISORS, INC. 
  • 42.
    About John Doyle Establishedby John Doyle, Peachtree Media Advisors, Inc. serves the interactive marketing, digital and out-of-home sectors of media. Mr. Doyle has more than twelve years of media investment banking experience, having worked as a senior level investment banker at Veronis Suhler Stevenson and JEGI. After graduating from Dartmouth College In 1995 with a double major of Engineering and Economics, Mr. Doyle specialized in the business information services and specialty media and marketing services at Veronis Suhler Stevenson (VSS). While at VSS, Mr. Doyle performed M&A advisory services to sell-side and buy-side clients, in addition to developing platform acquisition strategies, performing leveraged buy out analysis and conducting due diligence for the VSS private equity funds. In 2000, Mr. Doyle successfully launched a digital production company in Los Angeles, CA, developing both online and offline digital content. In 2001, the company transitioned to focusing solely on raising money for offline film and television projects. Mr. Doyle has worked with Conde Nast, Fox Cable Networks, 20th Century Fox, Writers & Artists Agency and Revolution Studios. In 2004, Mr. Doyle returned to media investment banking with The Jordan, Edmiston Group, Inc. His primary responsibilities included developing qualitative and quantitative analytical materials at each phase of the M&A transaction process. Highly experienced in valuing, analyzing and positioning media businesses, Mr. Doyle was responsible for closing more than ten media M&A transactions. Peachtree Media Advisors, Inc. was established to serve the merger and acquisition advisory needs of the interactive marketing, digital consumer and out-of-home sectors of media. With a substantial amount of media operations and investment banking experience, Mr. Doyle is able to deliver expert advice in valuing new media assets, positioning companies during the sale process, developing information memoranda to send to potential buyers or investors, coaching management through presentations, developing bids/deal structure analysis and managing the due diligence process to closing. 42 PEACHTREE MEDIA ADVISORS, INC. 
  • 43.
    Industry Relationships 43 PEACHTREE MEDIA ADVISORS, INC. 
  • 44.
    Peachtree Media Advisors,Inc. February 2009 50 Vanderbilt Ave., #30 New York, NY 10017 T: (212) 570-1009 F: (646) 607-1786 www.PeachtreeMediaAdvisors.com ▪ JohnD@PeachtreeMediaAdvisors.com 44 PEACHTREE MEDIA ADVISORS, INC.