$83M Hot Ones Sale // Politics in Creator Economy and Valuation Estimate
Chris Erwin
M&A and strategy advisory for creator economy | 3x founder and digital leader | Savannah real estate investor
Hi readers,
Today we discuss the sale of First We Feast and hit show Hot Ones to a buyer consortium including its founders and Soros Capital, the deal logic, valuation estimate, and how political investors are making moves in the creator economy.
Other quick hits:
Onward,
Chris
I'm the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
$83M Hot Ones Sale // Politics in Creator Economy and Valuation Estimate
Buzzfeed just sold First We Feast and hit show Hot Ones for $82.5M.
I summarize the deal details, and offer insights on (1) revenue and EBITDA valuation multiples and (2) increasing political investment into the creator economy.
Aright, let's break it down…
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---TARGET: First We Feast---
OVERVIEW
FINANCIALS
SELECT SHOWS
“HOT ONES” HIGHLIGHTS
CAPITAL MARKETS HISTORY
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—TARGET OWNER: Buzzfeed—
OVERVIEW
STOCK PRICE
FINANCIALS OVERVIEW
CAPITAL MARKETS HISTORY
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---BUYER: Soros Fund, Crooked Media, Mythical Founders---
BUYER CONSORTIUM
GEORGE SOROS BREAKOUT
OTHER SOROS MEDIA INVESTMENTS
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---DEAL DETAILS---
OVERVIEW
DEAL ORIGINS
VALUE PROP
POST DEAL OPS
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领英推荐
WHAT ELSE I FIND INTERESTING & DEAL INSIGHTS
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My estimate of revenue and EBITDA valuation multiples …
There are press reports that FWF does $30M in annual revenue. I assume EBITDA margin is in the 10-20% range. Likely company has been inefficiently run under Buzzfeed over past few years, since Buzzfeed’s publicly reported financials show continued decline in company performance. Also, FWF likely has many allocations in its P&L from parent co for back office and other shared services. I bet standalone the company will have a path to much higher margins.
At $82.5M purchase price and $30M revenue, that’s a 2.75x revenue multiple, which I’d assume is on an LTM basis.
At 20% profit margin, or $6M EBITDA, that’s a 13.75x EBITDA multiple.?
At 10% profit margin, or $3M EBITDA, that’s a 27.5x EBITDA multiple.
Of note, I previously estimated the valuation multiple for the sale of Complex to NTWRK. Complex reportedly did around $100-150M of revenue and was sold for $114M (all-in price). That implies a revenue multiple in the range of 0.9x to 1.1x. I also estimated EBITDA at around 10% (which declined significantly after Buzzfeed ownership, supposedly was above 20% pre sale), which would imply an EBITDA multiple of 7.6x to 11.4x.
My guess is that the FWF sale multiple was likely on the higher end. Since FWF was a premium asset within the Complex portfolio, I can see it going for 10-15x EBITDA. If one were to normalize FWF margins for a standalone scenario after being untangled from Buzzfeed, the EBITDA margin could be higher, and the valuation multiple range could be lower.
That speaks to the opportunity for the new buyer consortium, on top of investing into the business for growth as I described in the points about the deal value prop.
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Increasing interest in creator economy from politically oriented investors…
Soros has long been an active and politically-oriented media investor. See my media M&A detail that I highlighted above. Now they’re buying one of the most prized YouTube-native IP franchises in FWF and Hot Ones.?
This is party of a growing theme of politically-oriented buyers and investors increasingly leaning into digital media, and specifically the creator economy.?
Semafor recently reported that Fox is talking to political media acquisition targets like Red Seat Ventures and The Daily Wire, which are digital-native and lean conservative. Fox might also be looking at audio networks like Audioboom and iHeart.
This also makes me think of Highmount’s $100M investment into Dude Perfect, which I wrote about here (I also pasted an excerpt below).
Makes sense.?
If you want to influence the masses, you need to go where modern audiences are. And modern media channels, particularly social media, podcasts, and influencers x creators, have an outsized impact on reaching consumers and influencing them. From their purchase decisions, to their voting behavior.?
Brands and marketers have made the move.?
Newco launchers have made the move.
And now politically-affiliated parties and investors are starting to pay a lot more attention and put their dollars to work in the creator economy as well. Particularly after the learnings from Trump’s presidential bid win, which is being described as the “first podcast election”.
Welcome to the party new friends. Maybe we’ll see more of you at RockWater-hosted exec events in 2025 ;)
Lastly, as I was doing quick research on the deal, I found this quote from Fortune interesting…
“Hot Ones” turned down an interview request from Vice President Kamala Harris’ team during her presidential campaign because the show did not want to “delve into politics,” Harris campaign strategist Stephanie Cutter said after the election.
Might that change after new ownership from Soros?
Maybe.
The new Soros ownership is also noteworthy when you consider this insight from Business Insider…
Earlier this year, Ramaswamy bought up a 9% stake in BuzzFeed and told Peretti he should bring a group of conservative media types onto BuzzFeed's board and turn BuzzFeed into a Twitter-style platform. Then he suggested that when BuzzFeed's debt came due this month, the company would be unable to pay it back and that somehow Ramaswamy would end up controlling the company. That doesn't seem like an option anymore.
Yes, that sounds quite right.
Alright, that’s enough deal analysis for one week. I’m taking a much needed vacay, so there won’t be another M&A breakdown for at least the next couple weeks. See you in January!
…BTW, for some final “final” reading, below is the excerpt from my analysis on the $100M investment into Dude Perfect…
“Dude Perfect has a faith-based mission: “We’re about giving back, spreading joy and glorifying Jesus Christ”.
Three members of Highmount’s leadership, including their two founders, have faith-based affiliations per their website bios.
Makes me wonder who the LPs are in Highmount – could be parties who have faith-based investment mandates, where financial ROI may not be the only metric for success.
Think church pension funds, religious groups, HNIs, and family offices.
Of note, I’m not personally aware of much PR or press coverage of faith-based organizations investing in the creator economy. This could signal a new trend worth paying attention to, or simply that more press coverage is needed.?
I mean, one could say that religion is the OG of the creator-based economy…but that’s for a separate blog post.?
And speaking of LPs, it’s also worth noting that Highmount’s CEO and COO are both former Koch Industries (“KI”) execs. KI is the 2nd largest private company in the US (after Cargill) and is estimated to do over $125B in annual revenue and employ over 120,000 global employees. KI CEO Charles Koch and his political network are also major donors to Republican and libertarian causes.
KI is based in Wichita Kansas, and Highmount’s website lists offices in both Wichita and NYC. Makes me think that KI or affiliated parties could be a meaningful LP in the new Highmount fund, and thus have a meaningful influence on Highmount’s future investments.
Again, I can’t confirm any of this, as I’m just speculating.
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M&A and strategy advisory for creator economy | 3x founder and digital leader | Savannah real estate investor
2 个月Very curious to see how talking about politics on LinkedIn, even without taking a side, impacts the distribution algorithm… …so far, the algo is not a fan!
M&A and strategy advisory for creator economy | 3x founder and digital leader | Savannah real estate investor
2 个月Other politically or values-oriented creator economy M&A: - Highmount Capital investing $100M in Dude Perfect - Fox News eyeing Red Seat Ventures, The Daily Wire, and audio networks - Soros-backed consotirum buying First We Feast / Hot Ones What other deals am I missing here?
Founder and CEO @ LOOR.TV - Disrupting the film industry.
2 个月Awful to see Soros take Hot Ones away from us.