Question

The largest magazine publisher in the U.S., Pressworks Inc., acquired a cloud-based data science marketing company FlowData Stream for $220 million in January 2020. Pressworks Inc. is a legacy paper-based magazine publisher that has been in business for more than 50 years. Over the years, the company has been able to manage through the digital transformation of traditional print business, but it has not been easy. Over the last 8 years, Pressworks Inc. has downsized its print operations to manage expenses, while maintaining some major global fashion magazine brands. Several of Pressworks Inc’s print magazine customers have also begun to scale-back their print circulations while ramping up their digital transformations. Many of Pressworks Inc.’s traditional customers have questioned the company’s ability to skillfully transition from print to digital. FlowData Stream helps businesses of all sizes manage ad spend and maximize their online advertising budget on platforms including Google Ads, Bing, and Facebook. They develop complex, customized algorithms that provide several different data points that allow customers to better understand targeted buyers’ behavior. FlowData Stream has a strong computer science and engineering team that have consistently changed the way advertisers reach desired target markets. The company manages approximately one billion dollars in advertising spend for tens of thousands of companies across the world. FlowData Stream is estimated to generate $85 million in revenue and $25 million in earnings this year.

Given this information, answer the following question. Describe four different reasons why Pressworks Inc. would purchase FlowData Stream. Please discuss why these four reasons are of interest to Pressworks Inc

Answer 1

1)Business Synergy- Paperworks inc is the largest magazine publisher in US and hence has a dedicated subscribership which brings in revenues from advertisement. Since the company is transitioning from print to digital, it makes sense to optimize the revenue from advertising in the digital medium. This is where flow data technology will help. Flow data can provide the technology backed to target subscribers through dedicated advertisement. Therefore, the synergies are there for a business acquisition.

2)FLow data financials- Flow data has steady revenues of $85 millions with earning of $25 million. Its revenue and earnings are attractive and with a billion dollars worth of advertising spend under its control, one can see that its revenue streams are protected. So it makes business sense to buy it out at a price often times the earnings. The Valuations are attractive.

3)Technology leadership- Flow data has strong R&D and engineering teams who have created good products to mine the data through algorithms and allow advertisers to maximize the effectiveness if their ad spend.

4)Digital Penetration- The usage of social media has increased digital interactions. These are opening up new markets for companies and making the products more accessible to consumers.Having a presence in the digital space increases one's competitiveness and they are better prepared for future digital needs.