In relative terms, small papers cheaper than ever

Had a notion you might like to own a small newspaper? Wondering if that's rational, in light of all the talk doubting the future of newspapers? Actually, now is a good time to buy a small paper, says a broker who makes his living putting together newspaper deals.

Small- and medium-sized newspapers are selling at historically low multiples of earnings before interest, taxes, depreciation and amortization (debt payments), "according to John Cribb, managing director of Cribb, Greene & Associates," reports Editor & Publisher. The multiples are four to eight times EBITDA, compared to 10 to 14 "not so long ago," and the lowest since brokers started keeping track, Mark Fitzgerald writes on E&P's Fitz & Jen blog.

"It won’t surprise you to learn that a newspaper broker thinks this makes a fine time to buy newspapers, but Cribb offers a clear-eyed analysis of the biggest barrier to newspaper acquisitions -- which isn’t the undeniably low valuation multiples, but financing," Fitzgerald reports, quoting Cribb: “Banks consider newspaper loans as toxic (interesting because many newspaper companies have better balance sheets than their lenders). Our guess is that availability of traditional bank financing for newspapers will trail the national economic recovery by many months, and likely never return to the relatively easy credit of the past. ... Seller financing has always been common in very small newspaper transactions and will appear in larger and larger deals as time goes on.” (Read more)

Community newspapers' revenue has declined during the recession, but much less than metropolitan newspapers, we reported in March.