By Demi Akinjide, Saihejpal Ailwadhi, Ben Fobel, Zac greenberg and Will Sergent (University of Bristol) and Sanjana Ramaswamy, Jinghan Jennifer Huang, William Chang (University of St Andrews)
Overview of the deal
Acquirer: Daily Mail and General Trust (DMGT)
Target: New Scientist
Implied Equity Value:
Total Transaction Size: £70m
Closed date: 03/03/2021
The Daily Mail and General Trust (DMGT) have bought one of the world’s leading science magazines, New Scientist, in a £70m deal. DMGT acquired the science and technology magazine in cash from a consortium of investors led by Sir Bernard Gray, the publishing and events veteran and a former government advisor. New Scientist has a weekly circulation of roughly 120,000 copies with about half of readers in the UK and the rest in Australia and the US. Three quarters of its revenue comes from subscriptions and is expected to generate operating profit of about £7m this year on sales exceeding £20m. DMGT is expecting it can expand the magazine’s online presence and its events arm, whose projects include the annual New Scientist Live festival.
“[New Scientist] was a natural step in our consumer strategy to improve the quality of our revenues through building up subscriptions and digital capabilities ” - DMGT CEO, Paul Zwillenberg
Company Details: (Acquirer - Daily Mail and General Trust)
Daily Mail and General Trust is British multinational media company that manages a portfolio of companies including The Daily Mail.
Founded in 1922, headquartered in Kensington, London, United Kingdom
CEO: Paul Zwillenberg
Number of employees: 9,600
Market Cap: $866.13 (as of 19/03/2021)
LTM Revenue: $1,203m
LTM EBITDA: $134,000,000
LTM EV/Revenue: 1,35x
LTM EV/EBITDA: 11,8x
Company Details: (Target - New Scientist)
New Scientist is a science and technology magazine that is published weekly.
Founded in 1956, headquartered in London, United Kingdom
CEO: Nina Wright
Number of employees: 86
Projections and Assumptions
The acquisition primarily acts as a way for Daily Mail to expand its influence in the online media space. As expected, the physical newspaper industry suffered catastrophically during the pandemic, severely affecting DMGT’s advertising revenues. Metro, the company’s free physical newspaper, suffered a 40% fall in revenues last year, and advertising was down over 30% for the firm as a whole during 2020. Consequently, the acquisition of New Scientist shows that Daily Mail is positioning itself to take advantage of the growing demand for online media in the wake of the pandemic. The move represents a wider simplification of Daily Mail’s strategy, moving from a diverse conglomerate to a focus on a smaller set of media businesses. Zwillenberg, DGMT’s Chief Executive said last month that the company’s strategy is to “ increase the focus of the DMGT portfolio, which has resulted in the group operating in four sectors, compared to ten in 2016”. The acquisition will allow DMGT to take advantage of New Scientist’s profitable subscription model, where it receives 75% of its revenues, giving it the ability to cross-subsidise from other DMGT businesses with both capital and its existing expertise in online media, allowing the magazine to expand its readership and fulfill its international potential.
Reporters agree that Daily Mail are ‘having a blast’ in their acquisition strategy of New Scientist’s, given the potential qualitative and quantitative long-term upsides they can exploit. One of the advantages revolve around their target’s financial potential. Given New Scientist’s pandemic-proof business model, they are expected to produce £7 million in profits. Consequently, it is natural that such acquisition generates potential long-term synergies. This appears to be confirmed by Paul Zwillenberg, suggesting that New Scientist will improve Daily Mail’s revenue through digital capabilities and subscriptions. Furthermore, Daily Mail sees this as an opportunity to grow their online presence, including the annual ‘New Scientist Live Festival’ in Slovakia – demonstrating the potential long-term financial benefits of this acquisition. The long-term upside of this deal occurs due to the cultural fit of both these companies. Given that approximately 50% of its readers are from the UK, this would allow Daily Mail to leverage its distribution network to New Scientists.
Risks and Uncertainties
Going forward, COVID-19 remains a key source of risk and uncertainty for both parties. In normal times, commuters make up a large portion of DMGT’s sales; for instance, revenues within the Metro have dropped 40% last year. This dramatic drop in revenues is linked to a 7% decrease in overall circulation of physical offerings, as well as a 30% decrease in advertising, both of which are a result of the ongoing COVID-19 pandemic. Therefore, a key uncertainty going forward is how DMGT will navigate COVID-19 pandemic, with increased digital footprint appearing to be the ideal strategic move.
In addition, there are key questions surrounding the compatibility and synergism between New Scientist and DMGT’s portfolio newspapers. According to mediabiasfactcheck.com, DMGT’s flagship offering - Daily Mail has been graded ‘Low’ in its factual reporting and greatly right-leaning, while New Scientist has been graded ‘Very High’ and neutral. As a result of these divergences in factual reliability and political leanings, the acquisition poses negative reputational risk for New Scientist, which prioritises legitimate science-backed sourcing and the avoidance of overly evocative, tabloid language.
“In a time when facts are in short supply, there has never been a greater need for a trusted, impartial source of information about what is going on in the world – or a greater need for inspiration through exceptional ideas” - NewScientist, Mission Statement
More specifically, the reputational risk posed by the acquisition could translate into decreased demand and sales, particularly by base viewers of the New Scientist who may view the deal to be indicative of a shift away from the New Scientist’s core values and mission statement.