- BuzzFeed's acquisition of HuffPost has sparked speculation that BuzzFeed could try to buy other digital media companies, possibly by joining forces with a SPAC.
- SPACs, or Special Purpose Acquisition Companies, armed with hundreds of millions of dollars are already evaluating a variety of digital media ventures.
- SPACs are likely to eye media companies with name recognition, like Vice Media or Vox Media.
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Is Jonah Peretti's BuzzFeed on a path to going public?
At small private industry dinners from Los Angeles to New York, executives from Special Purpose Acquisition Companies, or SPACs, are flooding the zone.
Last week, Buzzfeed stunned COVID-cowed medialand with news it was acquiring digital newspaper HuffPost from Verizon and giving the phone giant a stake in a larger entity. Verizon agreed to invest in the new company, sparking speculation that Peretti would try to add other companies while remaining independent, possibly by joining forces with a SPAC. Peretti has said BuzzFeed would hit profitability this year, buoyed by growth in e-commerce, or affiliate, business. BuzzFeed declined to comment for this article.
The appetite is there. These shell companies are armed with hundreds of millions of dollars and are already running the slide rule over a variety of digital media ventures, which might see SPACs as a way to stay independent while taking advantage of IPO cash.
"SPACs have become the flavor of the month in the media and entertainment consolidation game," said Peter Csathy, founder of advisory, Creatv Media.
"Billions of investment dollars are sitting on the sidelines now, aggressively chasing and competing for content-driven opportunities that can be presented to a frothy and liquid public market increasingly driven by new tech-driven platforms like Robinhood," Csathy said. "Robinhood feeds off young, inexperienced investors, and BuzzFeed is precisely the type of high profile youth-driven brand that logically could take advantage of these trends."
Read more: A rush of media and advertising companies are going public via SPACs. Here's why Playboy, CuriosityStream, and Digital Media Solutions are betting on blank-check deals.
One media chief executive told Business Insider: "The emergence of SPACs is an increasingly positive force for digital media. BuzzFeed, Vox, there are healthy, large-scale digital media companies that exist that have more or less given up on selling to big cable companies or other big media companies."
SPACs are likely to eye media companies with name recognition, like Vice Media, part owned by Disney though its acquisition of Fox assets; Vox Media, part-owned by NBCUniversal; Group Nine Media, part-owned by Discovery Communications; and other players including Bustle Digital Group, Axios, and newsletter company TheSkimm.
No one who spoke to Business Insider named specific deals that were in the offing, however. Vox's chief executive Jim Bankoff told The New York Times, "In a consolidating market, we're going to act strategically. We look forward to any opportunities as they come up in 2021." The company didn't comment for this article. Other digital media companies named in this article didn't immediately reply to requests for comment.
Another possible target is Law and Crime Network, the TV-digital venture run by Dan Abrams, chief legal analyst at ABC and media entrepreneur. Abrams has been approached by potential acquirers.
"Law and Crime presents an opportunity for larger companies that are looking for a passionate audience but where it is also profitable," he said. "We have the two things right now that major media companies are looking for: A passionate niche audience and profitability. The days of people buying unprofitable companies have kind of faded."
Few think Vice will want the scrutiny of a public market listing, though "emerging growth" SPACs have much less stringent rules when it comes to reporting historical figures or giving shareholders a say on pay, for example. "Bustle is in the best position; I would think they're all taking to SPACs," said one major financial player. Bustle declined to comment.
Joanna Coles, the former chief content officer at Hearst Magazines, runs Northern Star Acquisition Corp., and is likely to be looking over the digital media players for prospects, even while the company has said it is looking at e-commerce ventures. The SPAC was set up to raise $300 million, according to SPAC Research data, cited by Reuters. The company declined comment.
Read more: Inside BuzzFeed and HuffPost's merger, where talk is turning to who will be HuffPost's next EIC and what BuzzFeed will buy next
Todd Boehly, the chief executive of Eldridge Industries, which owns stakes in assets including MRC, the LA Dodgers and Draft Kings, also has a SPAC called Horizon Acquisition Corp II. Boehly was not immediately reachable. Alan Mnuchin, a veteran media banker, leads Falcon Capital Acquisition which lists digital media as a target. Mnuchin was not immediately reachable.
Whether Peretti will spearhead an industry roll-up is yet to be seen. One person in the digital media space predicted each player could go their own path via a SPAC. "There is no reason there can't be three, four, five [SPACs] in the space."
Another reason these shell companies with money could be popular with the small digital media players is that their natural acquirers — the bigger media companies — are seeing their valuations decline, and that's had a knock-on effect.
And Verizon and AT&T have struggled to show they're sleek media operators.
Some media operators want a better deal.
"Why should we take a valuation hit just because acquirers don't have their act together?" said one media executive, noting that valuations of digital media companies have improved since a couple years ago when they were three times revenue.
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