Financial Management

BLUNTLY MEDIA: A
PRIVATE COMPANY
VALUATION
Case Resolution

Diogo Sampaio, Guilherme Cardoso, João

Gomes, Pedro Gomes l 1M.EGI
 "Bluntly Media" Case, Financial Management

Index

Contextualization of the problem

Case study analysis

Conclusion and final considerations

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 "Bluntly Media" Case, Financial Management

Contextualization of the problem

Bluntly Media is a private direct marketing agency that provided print and digital
marketing solutions, media sales and digital services for a broad range of clients

In early July 2013, Paterson Publishing, Fortune 200 Company, expressed interest
in purchasing Bluntly. Paterson’s goal with this acquisition was to enchance its
digital marketing and design management

Jackson Ferdy was assigned to help prepare the deal marketing material and assist
with the valuation assessment of Bluntly Media. He needed to use a variety of
valuation methods and propose a strategy that could assist Bluntly Media in
attaining a higher price

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 "Bluntly Media" Case, Financial Management

Case Study Analysis Structure

SWOT Analysis Bluntly Media Merger and Decision Making

Enterprise value Acquisition Data and

Comparable Public
Companies

4
 "Bluntly Media" Case, Financial Management

Case Study Analysis Structure

SWOT Analysis Bluntly Media Merger and Decision Making

Enterprise value Acquisition Data and
Comparable Public
Companies

4
 "Bluntly Media" Case, Financial Management

Before analyzing the company, it is important to take into account what are the strenghts,
weaknesses, opportunities and threats of Bluntly Media

Strenghts
Cover different areas of marketing services
Health financial position (investment capacity)
Company with experience (operating since
1990)
Positive reputation in the market (wide range
of clients)
Weaknesses
Difficulty in raising equity quickly due to being
a private company
Company organization (key information stays
on top of the three)
Cash cycle of the company is not efficient.

Opportunities Threats
Expand to social media to reach more Company services can be easily
costumers replicated
Explore the digital marketing area in depth Staff works as inventory in this type of
Transformation of company services through service
innovative marketing services Low consumer confidence
Low barriers to entry in this type of industry
opens door to internationalization 5
 "Bluntly Media" Case, Financial Management

Case Study Analysis Structure

SWOT Analysis Bluntly Media Merger and Decision Making

Enterprise value Acquisition Data and

Comparable Public
Companies

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 "Bluntly Media" Case, Financial Management

Calculating the Enterprise Value of the company is a crucial step for the analyse, but to understand
its value it is necessary to comprehend its assumptions.

The Discounted Cash Flow analysis

attempts to determine the value of an
investment today, based on
projections of how much money that
investment will generate in the future.

Companies typically use the weighted

average cost of capital (WACC) for
the discount rate because it accounts
for the rate of return expected by
shareholders.

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 "Bluntly Media" Case, Financial Management

Calculating the Enterprise Value of the company is a crucial step for the analyse, but to understand
its value it is necessary to comprehend its assumptions.

Assumptions

Beta: 4,94 (Industry: 1.68) WACC: 6,92% (Industry: 9.33%)

According to the Beta of the company,
the risk is higher compared to the general
market
Cost of Equity: 30,82% (Industry: 11.51%)
Lowering the company's risk characteristics will
also lower this cost
After Tax Kd: 5.49% (Industry: 4.00%)
Lowering the company's risk characteristics will
also lower this cost
Risk Premium: 5.75%
Higher perceived risk correlates to a higher required return
and vice versa. The WACC formula is simply a method that
attempts to do that. So our company, compared with the
industry, has a lower risk
Expected growth rate (sales): 2,69%
Average EBITDA margin: 3,20%
Capex growth: 1,32%
Terminal growth rate: 1,89%

Risk-free Rate: 2,69%

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 "Bluntly Media" Case, Financial Management

Calculating the Enterprise Value of the company is a crucial step for the analyse, but to understand
its value it is necessary to comprehend its assumptions.

Sensitive Analysis

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 "Bluntly Media" Case, Financial Management

Case Study Analysis Structure

SWOT Analysis Bluntly Media Merger and Decision Making

Enterprise value Acquisition Data and

Comparable Public
Companies

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 "Bluntly Media" Case, Financial Management
Bluntly Media enterprise value can be estimated in diferent ways, for exampole, by comparing it with
recent merger and acquisition data and similar comparable public companies

TEV / REV
MEDIAN TEV / EBITDA TEV / EBIT TEV / EBIT (US$ THOUSANDS)
383K 564K
(1)
M&A $ 28 193,37 (+34,8 %)
TEV (US$ THOUSANDS)

M&A Adjusted $ 41 649,61 (+99,1 %)

Public Traded
$ 46 396,47 (+121,8 %)
Companies

Public Traded $ 53 968,84 (+158 %)

Companies US

Public Traded Public Traded

M&A M&A Adjusted
Companies Companies US

(1) All percentages were calculated comparing the TEV / EBIT value with the TEV using the discounted cash flow model
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 "Bluntly Media" Case, Financial Management

Case Study Analysis Structure

SWOT Analysis Bluntly Media Merger and Decision Making

Enterprise value Acquisition Data and

Comparable Public
Companies

12
 "Bluntly Media" Case, Financial Management

Analysing Political, Economic, Social, Technological, Environmental, and Legal factors that
impact the macro environment in which Bluntly Media operates in are crucial in decision making

Political Economical Social

Political consensus among
various parties regarding
taxation rate and
investment policies. Over
the years the country has
progressively worked to
lower the entry of barrier and
streamline the tax structure.
Inflation rate is one of the key
criteria to consider for Bluntly
Media before entering into a new
market.
Bluntly Media should closely
monitor consumer disposable
income level, household debt level,
and level of efficiency of local
financial markets
Bluntly Media should closely follow
the dynamics of why and how the
consumers are buying the products
Demographic shifts in the
economy are also a good social
indicator for Bluntly Media to
predict overall trend in market and
product demands.

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 "Bluntly Media" Case, Financial Management

Analysing Political, Economic, Social, Technological, Environmental, and Legal factors that
impact the macro environment in which Bluntly Media operates in are crucial in decision making

Technological Environmental Legal

Artificial intelligence and
machine learning will give
rise to importance of speed
over planning. Bluntly Media
needs to build strategies to
operate in such an
environment.
Consumer activism is significantly Intellectual property rights are one
impacting Bluntly Media branding, area where Bluntly Media can face
marketing and corporate social legal threats in some of the markets
responsibility (CSR) initiatives. it is operating in.
Environmental regulations can
impact the cost structure of
Bluntly Media. It can further
impact the cost of doing business
in certain markets.

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 "Bluntly Media" Case, Financial Management

Given Paterson publishing previous acquisition history, in the last 2 years they have almost reach
last decade's budget. How much more is Paterson willing to spend to aquire Bluntly Media? These
expenses must be considered when proposing an offer to the buyer

TOTAL SPENT (US$ M)

1990 - 1999 $1 664

AMOUNT (US$ MILLIONS)

2000 - 2009 $6 442

2010 - 2012 $5 356

(only 2 years interval)

1990 - 1999 2000 - 2009 2010 - 2012

Data gathered from Bluntly Media: A Private Company Valuation - Exhibit 4 15
 "Bluntly Media" Case, Financial Management

When a deal of this magnitude is on the table it's important to understand every single aspect of
both companies and the external context surrounding this potential deal

Reduce cost structure Adavantages

Technological advances such as the Paterson's interest in Bluntly
online media content, advances in digital stemmed from its
printing, electronic books, and electronic specialty in digital marketing
submissions of documents and data and design management

Paterson Corporate
Acquisitions Bluntly
Publishing strategy

Back in 1973 Paterson Publishing One other strategy was to

Company offered solutions related to enhance its product quality,
commercial printing and integrated offering and reach through
communications strategic acquisitions.

Infrastructure Product quality

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 "Bluntly Media" Case, Financial Management
Paterson Publishing had made 28 acquisitions since it was founded, and from all these acquisitions,
none of the companies were specialized in digital marketing. Digital Media Solutions, which is owned
by Bluntly Media, focuses in said area.

BLUNTLY MEDIA COMPANY STRUCTURE CATALOGS AND CAPABILITIES

Editing and proofreading Data and analytics Website design and dev.
Layout Web banners Graphic design and image enchaement
Design Insert management Multimedia prod.
Sales and dist. Catalogs and blow-ins Digital video prod.
Printing Creative and design

Paterson Publishing Bluntly Media Improvement on existing services

Digital marketing services Gains new clients

Enters in a fast growing market

Less competition 17
 "Bluntly Media" Case, Financial Management
Summarizing Acquisition

Bluntly's Media Retained Bluntly's Media Balance Sheet

Earnings
2013 2012 2011 2010 2009

Since 2009, the company's Accounts Receival $ 8870,7 $ 6924,9 $ 7362,4 $ 8881,42 $ 6515,29
balance at the end of each 80,7% 73,1% 95,1% 98,3% 90,3%
year has bean progressivly
lower. Accounts Payable $ 9121,01 $ 7315,02 $ 8500,48 $ 6497,16
$ 9742,02
88,6% 97,3% 94,4% 94,1% 90,1%

2013
Doubled their net
income Minimum Sell Value: $ 25976,97
Reduced Shareholders
distribuition to zero
Average of TEV using M&A and Public Trade
Distribuition to parent
Companies TEV/EBITDA and TEV/EBT,
company

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 "Bluntly Media" Case, Financial Management

Thank You!
Diogo, Guilherme, João, Pedro and Simon