Disposal of two media businesses for Sky

DC Dwek Corporate Finance has completed the disposal of two media businesses for Sky to the full satisfaction of the shareholder, management team and the financial purchaser. For further details

 

Headland Media is involved in the in-store media business including bespoke music and screen services as well as the provision of news and DVD services to the cruise, merchant ship and hotel markets,. British Sky Broadcasting (Sky) purchased these two separate businesses as part of its acquisition of 365 Media Group (“365”) in early 2007.

Whilst the two businesses had been profitable for many years, they did not form part of Sky’s future strategy. DC Dwek Corporate Finance commenced the sale process by engaging the management team and ensuring that their objectives were aligned with those of the selling shareholder. We offered the two companies either as a combined entity or alternatively as two separate businesses. In particular, the management team was excited to develop the two businesses as a combined entity due to the significant marketing and operational synergies available.

The preliminary information was analysed and a valuation range agreed based on the prospective cash flows of the business and multiple analysis of comparable companies in the sector. Once all parties agreed on the information memorandum, we approached around 50 potential purchasers. These included both trade purchasers for either the in-store media and/or the news businesses. We also approached the private equity community in the UK and Europe due to the cash generating potential and the opportunity of leveraging the balance sheets.

After the review of the preliminary information provided, interested parties were requested to provide a non binding indicative offer for the businesses. This allowed us to gauge the level of interest and to invite these parties to presentations with the management team.

We narrowed the group down to six parties and a more detailed management presentation was prepared with further financial breakdowns. This enabled the potential purchasers to discuss their objectives with the management team and to assess the fit into alternate business models.

Further information was provided and the interested bidders submitted revised offers. Once the revised bids were received, it was apparent that both trade and private equity interest remained.

Our objective was to complete the process as rapidly as possible, but to retain competitive tension. Three parties were left with significant interest and further discussions with management took place, analysing more detailed monthly and quarterly financial data. A final round of indicative bids was received and one bidder was eliminated.

A draft version of the Sale and Purchase Agreement (SPA) was dispatched and negotiations commenced. One party was selected, an exclusive period agreed and detailed negotiations commenced. Time pressure was maintained to ensure that the transaction finished rapidly. Although final negotiations were tense, a deal was finally agreed that satisfied the management team, the selling shareholder and the purchaser, the private equity firm controlled by Peter Dubens.

In conclusion, the transaction was successful due to strong teamwork between the selling shareholder, the management team and the advisor to peacefully resolve issues as rapidly and positively as possible. Negotiations were often tense with the advisor ensuring that momentum was maintained until the deal was finalised.

Sky commented: “Your sound advice and transaction management skills enabled us to achieve a great result for both Sky and the management team.”

Headland Media summarised the process as follows : “David represented all the stakeholders with great skill, persistence and enthusiasm. His tenacity and negotiating skills were paramount in concluding a deal for the management team in the face of a collapsing credit market.”

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